One of the decisions you will have to make once you have an accepted offer on a home is how you would like to hold title to that property. There’s a variety of ways to do so, but the key factor is who you will be holding title with (if anyone).
Holding Title may be an unfamiliar term, but it essentially means is who owns the home and what rights they have. Here are the basics, of course, we are not attorneys and each situation may be different, so check with a qualified professional (attorney/cpa) to determine the situation that is best for you.
If you plan to own the home:
By Yourself: You’ll likely own the home in Severalty which is used when a single individual or entity owns a parcel of real estate.
- With your Spouse: You’ll likely own the home as Tenants by the Entirety. This is a type of Joint Tenancy (see below) that is reserved for a married couple or reciprocal beneficiaries. There are a couple of important benefits to this type of title vesting:
- Rights of Survivorship – If one of the owners passes away, the other automatically recieves the title.
- Certain legal protection – Certain claims by creditors of one of the owners may not be able to be enforced on the property due to its effect on the other homeowner. Of course, this is complicated law, so consult an attorney if you have detailed questions.
- Ownership is not represented as a percent of the whole, i.e. husband and wife aren’t 50/50 owners, each has an undivided interest in the whole and no property transactions can take place without the consent of both parties.
- With Family: You may want to own the home as Joint Tenancy. This is almost exactly the same as Tenants by the Entirety above in the sense that it has the three characteristics defined above. This can only apply to individuals (more than 2 is ok) and can’t be used for Trusts, companies or any other non human entity.
- With Someone Else or an Entity: You’ll likely own the home as Tenants in Common.
- With this type of ownership, the percentage interest IS defined.
- Individual portions can be conveyed without the others’ consent.
- There are equal rights of possession meaning a 1% owner has the same right to occupy the property as a 99% owner; however proceeds from sale would be split according to the ownership percentages.
- There is no right of survivorship, so if one owner passes, that portion passes on to the deceased owner’s heirs and not to the other owners.
Of course, there are other types of ownership as well, such as trusts, life estates and types of corporate ownership. It’s best to consult a true expert for advice and a comprehensive financial plan with any of those options.
On August 3rd, the Restoring GI Bill Fairness Act of 2011 became law and reduced the VA Funding Fee for loans closed on or after October 1st.
The fee is significantly lowered for all first time & subsequent use purchases as well as cash-out refinances. It is also going to be lowered again in 2012 & 2013 for subsequent use purchases with less than 5% down.
Here’s a summary of the changes:
First Time Use (Active Duty – National Guard & Reserves add 0.25%)
- No Down Payment: Reduced from 2.15% to 1.40%
- 5% Down or More: Reduced from 1.50% to 0.75%
- 10% Down or More: Reduced from 1.25% to 0.50%
Subsequent Use (Less than 5% Down – Active Duty/Guard/Reserves)
- As of 10/1/11: Reduced from 3.30% to 2.80%
- As of 10/1/12: Reduced from 2.80% to 2.15%
- As of 10/1/13: Reduced from 2.15% to 1.25%
Note: With 5% down or more, the first time use rates apply
Remember, if you have a VA disability rating of 10% or more, you can have the VA funding fee waived. If not, the funding fee does not need to be paid out of your pocket, it can be rolled into your loan amount.
Aloha veterans and thank you for your service!
We all know that Hawaii is full of unique properties. Site condos and ohana units are two of the property types that cause a lot of confusion. The following paragraphs explain what these two types of properties are and how they are treated for FHA, VA and conventional loans.
Site Condos
Site condos often cause confusion because they look and feel just like a single family home, but it is really a part of a condominium complex. It is usually one of several detached homes on a single lot. The easiest way to determine whether a home is a site condo is to look at its “TMK” or Tax Map Key number. If the last four digits are anything but ‘0000’ it’s a condo. The homes typically share ownership of certain common areas, but the structure belongs to the homeowner. It may be insured as an individual unit or as part of a master policy. For many lenders, all the units within the condo must actually be detached from each other one. If any unit is attached, any home in the complex may be considered attached. Exceptions may be made, but rates may be higher.
Loan Types and Treatment of Site Condos
Fannie Mae, Freddie Mac & FHA treat site condos the same as single family residences.
For the VA loan program, all condos must be approved by the VA, site condo or not. See our post related to VA condo approval procedures. They will be the same for site condos as any other VA non-approved condo.
Ohana Units
An “ʻohana unit” also known as an “accessory” or “mother-in-law” unit is a part of a house or a separate structure on the same lot that may contain a relative but which may not legally be rented to the general public. The ohana unit may not have a complete kitchen and is not a legal 2 unit property.
Loan Types and Treatment of Ohana Units
Fannie Mae, Freddie Mac, FHA and VA all allow ohana units, but rental income can not be used for qualifying. If the unit is legal non-conforming and can not be rebuilt, the area may not be valued. For VA loans, the property must be permitted completely.
We hope that helps clear up some of the confusion that may exist about these properties.
“Closing Costs”….just saying it makes people agitated with the sound of their bank account being drained. The reality is, whenever there is a loan transaction, there are fees incurred and parties related to the transaction that need to be paid. Paying fees is never an enjoyable experience, but there are ways to reduce the amount you have to pay. Here are 5 ways to reduce the closing costs on your next mortgage transaction:
1. Negotiate a Seller Credit
A seller credit is an additional sum of money paid by the seller for the buyer to use to pay closing costs. Think of it as a cash back program the seller uses to entice buyers to purchase their property.
What you’ll need to do:
Have your real estate agent request a seller credit in section C-67 of the purchase contract. There’s no guarantee that the seller will agree to give the seller credit, and if there are many offers on the property, it can make your offer look weak. But when done properly, receiving a seller credit can dramatically reduce your closing costs or possibly pay them entirely.
This is just a reminder that last year’s First Time Homebuyer tax credit had been extended one year for those serving our country abroad during 2009 and early 2010. However, the deadline to take advantage of that credit is fast approaching. Real Estate professionals and potential homebuyers across the country are scurrying to submit purchase contracts before the swiftly looming April 30th deadline of the $8,000 First Time Homebuyer Tax Credit. Last year’s tax credit was wildly successful; the IRS states that over 1.4 million first time homebuyers took advantage of this program as of September 2009. While those numbers are a bit dated, it does show how successful this piece of legislation was.
So, what does this mean for a good majority of us? Well, it’s just back to business-as-usual. Rates are low, housing prices have settled, and the economy is starting to turn around – even without the credit, it’s still a great time to buy.
Now, here is the exciting news! There is a little known blurb towards the end of HR 3548 – Worker, Homeownership, and Business Assistance Act of 2009 (the bill that extended the $8000 tax credit to April 30th, 2010), that allows for an extension of the credit until April 30th, 2011. Sweet! So, who’s still in? Who get’s the VIP extension of this lovely chunk-o-change? Let’s take a look, shall we?
Who qualifies?
- Members of the uniformed services (military)
- Members of the Foreign Service
- Employees of the intelligence community
CLICK HERE to visit the IRS informational page for more detail
How do I qualify?
- Must be on official extended duty outside the United States for at least 90 days between January 1, 2009, and April 30, 2010
What do I qualify for?
- $8000 first time homebuyer credit
- Purchase contract must be signed by April 30, 2011
This is pretty exciting news for those that qualify! So, if you found yourself deployed in 2009 or early last year, you can rejoice in knowing that you can take full advantage of this tax credit, while the rest of us poor souls can only watch from the sidelines. It’s a nice ‘Thank You!’ for your dedicated service to our country.
If the dream of homeownership lingers in your mind, this sure is a great incentive to pursue those further, and we’d love to help you along the way.
Hawaii VA Loans is proud to present our “Mortgage Insights in Under 2 Minutes” video series to help you understand the nuances of VA mortgage financing. This video series gives you the facts about VA home buying via easy to digest 2 minute segments that help you get familiar with the process before you leap in to the process.
You may have heard that the VA Loan program is a great option to help buy your home but you still don’t know exactly why. Here’s a quick look at some of the benefits that a VA Loan provides compared to the other mortgage financing options available.
Here’s all our videos in our Mortgage Insights Video Series.
So you’ve just put your home up for sale and had your first open house. Before you know it, you have multiple offers and it’s time to decide which offers to reject and which offer to accept (or counter-offer). While mulling through your offers you notice that you have a potential buyer who plans on using a VA Loan to purchase your property.
When discussing the offer with your real estate agent, she advises you to ignore the offer by the VA buyer since the Veteran is not allowed to pay certain closing costs on a VA Loan – which in essence, could equate to additional costs for you, the seller. Is this wise advice? Let’s take a look.
The VA Non-Allowables
It is true that with a VA Loan, the Veteran is not allowed to pay for the VA Non-Allowable closing costs which on average will save the Veteran roughly $1500-$2000 in closing costs – and thus, potentially more cost for the seller. But here are two facts that the seller must realize before deciding to deny the Veteran’s offer:
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Termites: those creepy, crawly bugs that love to chow down on your home can be a major pest here in Hawaii (pun intended). How do they play into your VA home purchase process? Well, the VA states “Termite inspections are required on existing properties if they are located in an area where the probability of termite infestation is “very heavy” or “moderate to heavy” according to the Termite Infestation Probability Map published in the International Residential Code.” Guess what, Hawaii is considered a “very heavy” infestation area.
Luckily, a VA borrower does not have to pay the approximate $350 it costs for the inspection; this is seller’s responsibility. Also, any damage or infestation associated with termites must be corrected before the purchase can close, and at no cost to the VA borrower.
What can you expect on your termite report?
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The mortgage industry is regulated by many different federal agencies and has to follow myriad different regulations, some of which overlap, which is fun for everyone (sigh)! We’ll highlight the documents that address the 3 biggest concerns for most homebuyers:
- How much money do I need to pay right now?
- How much am I going to pay every month?
- Can my payment change in the future?
Regulations
Just for fun, here’s a list of regulations that apply to the mortgage process. Each of these require at least one disclosure & some may require even more than one:
- HMDA (Home Mortgage Disclosure Act)
- RESPA (Real Estate Settlement Procedures Act)
- TILA (REG. Z – Truth in Lending Act)
- FACTA (Fair and Accurate Credit Transactions Act)
- ECOA (Equal Credit Opportunity Act)
- Patriot Act
- Financial Privacy Act
- FCRA (Fair Credit Reporting Act)
- Other State Specific Laws
- Other Investor or Guarantor Rules
Three Most Important Disclosures for Borrowers
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So, you found your dream home, got your accepted offer, and everything is flowing along smoothly with you lender (hopefully it’s us). You’ve already picked out the new colors for the bathroom & kitchen, found all you need to know about schools in the area, and have already decorated the entire home in your mind. It’s a wonderful and exciting process purchasing a new home. You get a phone call from your lender, and they have some not-so-great news. The 3rd party appraisal came in with a value less than your accepted offer. No lending institution (that I know of) will lend more than the appraised value of the home, and clearly this can be an issue if the appraisal comes in low. Yikes!
So, what exactly does this mean? Do you lose the home? Can you still continue? Luckily, there are a few options available to a VA borrower:
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One of the decisions you will have to make once you have an accepted offer on a home is how you would like to hold title to that property. There’s a variety of ways to do so, but the key factor is who you will be holding title with (if anyone).
3 Minute Thursdays: 3 Options When Your Appraised Value is Low
VA Funding Fee Changes – Or Not!