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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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Top 5 Reasons to Buy a House Right Now

Buying a house is a highly individual decision—and a local one—but current trends are creating a favorable situation for many would-be homeowners.

Interest rates are low, employment is rising, home prices—in most markets—are still well below their peaks, and rents are through the roof.

Every family and each individual has various factors affecting the ability and the decision to buy a home. If you live in a market where studio apartments are $2,400 per month—while nearby condos sell for $300,000—it might make sense to buy a house instead.

(Remember, a local REALTOR® always is your best resource in helping you assess market conditions.)

Five Compelling Reasons to Buy a House Right Now

1. Interest Rates Are Still Low

Mortgage interest rates are still low—for now.

A 30-year-fixed-rate loan now averages 4.16%, according to Freddie Mac, but many economists believe we will see 5% rates next year. As interest rates increase, so do your monthly payments.

A $300,000 house at 4.16% with 20% down would have a monthly payment of $1,168. With a 5% interest rate, that payment increases to $1,288.

2. There’s More Inventory

As more houses enter the for sale market, prices stabilize.

“Inventories are at their highest level in over a year, and price gains have slowed to much more welcoming levels,” said Lawrence Yun, Chief Economist at the National Association of REALTORS®.

The upside is consumers now have more choices, if they are looking at existing homes.

New homes are another story: Yun says new construction needs to double its current production to meet market demand.

3. Home Prices Are Going Up

Home prices are rising.

The median price of an existing home was $223,300 in June, or 4.3% higher than June 2013. That’s the 28th consecutive month of year-over-year price gains, and economists expect that trend to continue. However, we are still at least 20% off the peak prices of 2006.

“Attempting to buy a home when the market is at its lowest point—or to sell at the peak—is tricky,” said Jonathan Smoke, Chief Economist for realtor.com®.

He compares it to trying to time the stock market.

“You might get lucky one or two times, but overall, timing the market does not work,” Smoke added. “It all points to purchasing power, and that’s a reflection of price and interest rates, which will both be higher in the future.”

4. Rents Are Sky-High

If you live in a big city, then you know rent is astronomical. In San Francisco, many people are spending 42% of their monthly income to pay the rent. Nationwide, rents are rising at a 4% annual clip.

It’s not unusual to see adults rooming together in expensive cities like New York, San Francisco and Chicago, but everyone needs his or her own space at some point.

Buying a home would lock in your monthly payment and stabilize your finances with a fixed-rate mortgage. This is, of course, assuming you don’t live the San Francisco area, where the average price of a home is $1 million.

(If you’re renting and never thought you could afford to buy a house, try our Rent vs. Buy calculator to see what’s possible.)

5. Employment on the Rise

Perhaps nothing is as important to the financial stability you need to buy a home as steady employment. The U.S. economy is finally adding jobs—about 200,000 new jobs per month.

The next generation of home buyers—the Millennials—has been particularly affected by the nation’s job slump. Saddled with student loans and tight lending restrictions, many in this generation have been living with their parents to save money until the economy picks up.

If your employment prospects look good these days and the other four factors check out, then it may indeed be the right time for you to buy a home of your own.


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Get a VA Home Loan in 5 Steps

Buying a home can seem like an intimidating process. But it really doesn’t have to be.

That’s especially true for service members and veterans using the VA home loan program. From start to finish, the VA loan process has at its heart only a handful of steps.

To be sure, there are plenty of small but important details, from credit scores and sufficient income to the condition of the property. But buying a home using your hard-earned VA loan benefits doesn’t have to be an intimidating experience.

In fact, the big-time financial benefits of VA loans help scores of veterans who wouldn’t otherwise qualify for home financing achieve the dream of homeownership.

Let’s take a closer look at the five basic steps of the VA loan process.

Prequalification

The first step is the most basic, but it’s an important place to start. Prequalification typically takes about 10 minutes or less. A lender will ask for your permission to access your credit reports and then give you a clear sense of where you stand.

VA lenders are generally looking for a credit score of at least 620, although the benchmark can vary. That’s a considerably lower score than military borrowers will need for conventional financing.

In addition to learning about your credit profile, lenders during prequalification will look to get a better feel for your homebuying goals and objectives. They’ll ask about your income and your employment and try to identify any potential red flags at the outset.

The goal is to get you moving on to the second step — VA loan preapproval.

Preapproval

Compared to prequalification, loan preapproval is more involved process. Lenders will want to get a much closer look at your financial situation and your ability to handle a mortgage payment. They’ll also start developing a paper trail.

You’ll fill out documents and paperwork, and lenders will start working to verify your income and other important information. The end result should be a preapproval letter that details how much a lender is willing to loan, provided certain conditions are met.

Preapproval letters are increasingly important in today’s housing market. Real estate agents and home sellers expect to see these letters included in an offer. In fact, some listing agents won’t accept offers on a home without a copy of your preapproval letter.

To be sure, getting preapproved for a VA loan doesn’t guarantee you’ll ultimately get it. There are still a handful of things that need to happen before you ultimately get the green light.

But VA loan preapproval is a key step in the process. Like prequalification, it’s also non-binding, which means you can seek preapproval from multiple lenders.

Getting Under Contract

Once you’ve got a preapproval letter, it’s time to start the house hunt. Finding a real estate agent who truly understands the VA loan program can make a tremendous difference for military borrowers.

VA loans are specialized loans that require specialized knowledge. The VA has its own Minimum Property Requirements that homes must meet. Real estate agents who know the program can help ensure veterans are focusing on move-in ready homes that are a good fit for this long-cherished home loan benefit.

Once you find a home you like, you’ll work with your agent to craft a purchase offer. In addition to no down payment and no mortgage insurance, VA loans also limit what borrowers can pay in closing costs. It’s common for VA borrowers to ask a seller to pay most, if not all, of their closing costs as part of the negotiation process.

The result of negotiations with a seller should result in a contract that makes sense for both parties.

Appraisal & Underwriting

As soon as you’re under contract to purchase a home, your lender will order the VA appraisal on the property. The appraisal has two main components — determining the fair market value for the home and making sure it meets the VA’s property requirements.

VA appraisals are typically completed and back to the lender in under 10 days. Your lending team will be working in the background to pull together additional documents and paperwork before getting your loan file in front of an underwriter.

The underwriter will review the loan file and alert the loan officer if there are any shortcomings or additional information needed. It’s important for borrowers to fulfill these requests as quickly as possible.

If things go well, the underwriter will review everything and issue a “clear to close,” which means you’re ready to head to closing day.

Closing

Closing day brings paperwork, a lot of signatures and finally celebration!


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Auto Insurance Myths Exposed

Content provided courtesy of USAA.

  • The color of the car affects my insurance rate. Not true. Rates are based on safety features, the cost of replacements or repairs and other factors the driver brings to the table. So paint your ride any color you like.
  • I have no-fault insurance so that means it’s not my fault. Duh! Wrong. No-fault insurance means you only deal with your insurance company, regardless of who is at fault.
  • My friend wrecked my whip, so his insurance will cover it. Nope. The policy follows the car, not the driver. Think twice before lending out yours
  • A ticket means my rates will go up. Not necessarily. If it was for something minor and it’s your first, the rates might not increase. Maybe slow down, and take a defensive driving course.
  • I already have auto insurance, so my new car is automatically covered. Seriously? A shiny new car needs a shiny new policy.

 


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8 Budgeting Tips for Military Families

From credit card debt to frequent moves, military families face financial challenges that have unusual dimensions from civilian families. Here are tips that will help your family save and budget for your daily life and your long-term goals. By tracking your spending and creating habits to contribute towards retirement, you’ll be prepared to budget like an expert and save like a boss.

Track Your Spending

Many people say that they don’t know where their money goes. Empower yourself by tracking where your money is being spent. Whether you keep track of your spending by writing down your expenditures, keeping a spreadsheet, or using a website that tracks all of your accounts, it’s important to know where your money is going. Once you know, it’ll make it a lot easier for you and your family to plan and budget for the future.

Get Rid of Your Debt

Military families are more likely than civilian ones to carry significant credit card debt, as they have unique challenges. All of those moves can definitely add up! Some military families also have student loan debt, which can affect your credit score. So what to do? Make it a regular habit to pay off a portion of your credit card debt beyond the minimum payment. If you can pay off even an additional $25 or more per month, your debt will steadily decrease.

Pay Your Savings First

Savings often come in last when you’re budgeting, after bills and expenses. Let’s turn this around. When you’re budgeting, make sure you factor in your savings as though it was a bill. After you’re paid, “pay” your savings account instead of waiting to put in what’s left over.

Build an Emergency Fund

The best thing you can do for you, your family, and your peace of mind is to build an emergency fund. That way you can roll with the rainy days when they inevitably come. As with paying your savings first, make paying your emergency fund first a priority. Most experts recommend saving at least 3-6 months worth of expenses. If that seems overwhelming, try to get to $1,000 first, and you’ll have a buffer.

Creating Habits with Automatic Deductions

Dealing with personal finance requires discipline. Make it easier on yourself through automatic deductions. To really get your savings and emergency fund going, set up separate accounts outside of your main checking account. Then, have regular amounts automatically deducted from your paycheck. Let’s say you automatically deduct $50 a week into a savings account. By the end of the year, you’ll have $2,600. Not bad for $50 that you probably wouldn’t even miss.

Live Off Of Last Month’s Paycheck

Once you’ve built an emergency fund of 3-6 months, you’re ready to level up to the next part, which is living off of last month’s paycheck. The way to do this is to save the equivalent of one month’s paycheck outside of the emergency fund or your savings. You don’t need to do it all at once, as building up that amount will take time. But once you do, you won’t be living paycheck to paycheck. For more information about how to make this work for you, read this article.

Contribute to the TSP

With automatic enrollment and simple choices regarding investments, the Thrift Savings Plan has been called “a model for all 401(k) plans.” Compared to civilian 401(k) programs, the costs of administering the plan are much lower since the investments are all index funds that track the market rather than being actively managed. That results in greater savings that are passed directly to you. Since all members of the armed forces can contribute, start now if you haven’t already. Even if retirement is a long ways away, the long tail of compound interest means you’ll be very grateful to your younger self for making such a sensible decision.

Take Advantage of Military Benefits

Being in the military comes with many great benefits, from free healthcare to discounts to the GI bill. Make sure you know what kind of benefits come with being in the military. Start here with our section covering benefits in depth so you and your family can start investing in your financial futures


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What Homeowners Insurance Does Not Cover

A homeowners insurance policy offers basic protection from the most common disasters. But because it’s built with the average American household in mind, your policy might not account for some risks associated with your location or cover all your possessions.

Floods

Flood insurance is mandatory when you have a mortgage on a home in a high-risk flood area. Even if you live outside a high-risk area, don’t make the mistake of assuming you’ll never experience a flood. In fact, nearly 20% of flood insurance claims come from areas of moderate to low risk, according to the National Flood Insurance Program. Whether it’s a flash flood or just a few inches from a storm, water can cause massive damage to your home and belongings. If you’re not financially prepared, the effects can be devastating. The National Flood Insurance Program has joined with insurers to offer flood insurance. Premiums, which vary depending on where you live, start at just $129 a year.

Earthquakes

Basic homeowners insurance policies don’t offer earthquake coverage. Fortunately, in many states, special earthquake coverage can be added to your policy.

Anyone who has seen the aftermath of an earthquake understands the devastation one can cause. The extensive shaking and cracking can demolish entire buildings, destroying your home and possessions. If you live in an area prone to earthquakes, consider strengthening your policy with this coverage.

Home Businesses

Your homeowners policy provides limited coverage for business equipment. Also, you are not covered for liability related to your home business — if, for example, someone gets food poisoning through your catering business or if a student visiting your home trips and breaks an ankle while leaving a piano lesson. If you run a business from home or have expensive office equipment, you may need additional coverage.

Valuable Personal Property

Homeowners policies can offer sufficient coverage for most personal property, but there are limitations. Valuable personal property insurance can take over where homeowners policies leave off. VPP insurance can provide coverage for losses due to fire or theft. It also covers damage or if an item gets lost — say a stone falls out of a ring or the ring falls down the drain. If you own valuable items such as artwork, jewelry, musical instruments, firearms, furs or silver, consider obtaining a VPP policy.

Broader Personal Liability

Homeowners policies offer limited coverage for liability protection. Given the litigious world we live in, an umbrella insurance policy can provide additional peace of mind. An umbrella policy helps protect you and your earnings if someone, such as a baby sitter or handyman, is injured at your home. It also helps provide protection if you (or a family member) are found liable in a serious automobile accident.

This type of insurance can provide extended liability coverage beyond your home and auto policies. Consider shielding your personal financial assets with additional liability insurance.