Collaboration and integration

Neal Jannels OMS

Neal Jannels is managing director of OMS

Collaboration and integration are two important words within any industry from a tech perspective. Throughout the pandemic, many business models and customer engagement processes have evolved to overcome many unforeseen challenges which has resulted in a tech explosion.

This has served to offer individuals greater control and choice over the types of tech they are using from a personal level and tools which they can use for work purposes to empower them to communicate better and be more productive with their time.

Rex proptech lenders platformOMS completes full API integration with West One

It’s more important than ever for tech providers to successfully service the varying needs of their clients, users, customers or creators – however they like to be known.

This can be done through careful planning, trial and error, a degree of luck, partnerships, collaborations, integrations or any combination of the aforementioned. These come in many different forms, so let’s look at a two recent examples covering areas way beyond the mortgage world but ones which have technology at the heart of them.


Instagram is reported to be testing new tools for creators to earn commissions and form partnerships with brands on its platform. The Meta-owned company is expanding its existing native affiliate tool to allow creators to discover products, share them with followers and earn commissions for sales driven by their posts.

Instagram is also testing new branded content partnership features to help creators get discovered by brands. Creators now have the ability to add to their preferred ‘brands list’ brands they’re interested in partnering with, which will give them priority when companies are searching for new creators to work with.


A new US and UK collaboration has integrated artificial intelligence (AI) and machine learning (ML) to support combat forces. For the first time, the Air Force Research Laboratory (AFRL) worked with the UK’s Defence Science and Technology Laboratory (Dstl) to develop, select, train, and deploy state-of-the-art ML algorithms to support armies.

The research provides wide-area situational awareness tech, and aims to improve decision-making, increase operational tempo, reduce risk to life, and reduce burden on manpower. The four-year partnership agreement includes objectives to accelerate joint UK/US development and sharing of AI tech and capabilities.

These examples couldn’t be more diverse but they do offer a very small sample of how tech can be used in a variety of ways to connect very dissimilar entities for a unique set of purposes.

Bringing this back to the mortgage market, for as long as I can remember there has been a huge emphasis on competition and very individual – at times almost clandestine – approaches to doing business.

This remains the case in some areas but we are also seeing a growing number of companies working together and broadening their thinking to utilise the skills, expertise and specialist nature of other businesses to better service the needs of the end customer.

After all, strong integrations and healthy partnerships can benefit a number of links in the mortgage chain. For those who can look a little outside the competitive box, the right collaborations can open doors to new audiences and build a stronger support network for existing clients. It can also serve to raise the stakes and push individual offerings to do better.

It’s always interesting when having tech-related conversations with intermediaries, specialist distributors, lenders and a variety of service providers to note exactly where this conversation starts and where it finishes.

Different parties come to the table with different ideas, different preconceptions and different needs. What may begin as a discussion on a certain feature, can often end up focusing on another thing entirely.

On the flip side, some people are laser-focused and have already undertaken extensive research when it comes to how certain solutions will impact their business.

As a business, we have certainly evolved our thinking in terms of how to progress the OMS platform. We continue to develop this internally and work on new features but we have also learned that we can progress quicker and more effectively when collaborating with trusted partners with the same ethos who have similar goals in mind.

This is evident in the fact that we have already integrated with four market-leading platforms – Iress, Twenty7Tec, iPipeline and Knowledge Bank to provide users with best in class for product sourcing, protection sourcing and criteria searching.

More relationships like these are expected to be formed in 2022 and this collaborative approach is one which is happening across the industry.

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The trouble with modern methods of construction

Geoff Hall is chairman of Berkeley Alexander

According to the National Housing Federation, England needs 340,000 new homes (including 145,000 affordable homes) per year until 2031.

Due to this desperate need to deliver new homes quickly, modern methods of construction (MMC) have been promoted as a way of working more effectively to achieve more, without using more.

Berkeley Alexander adds advisers

MMC, described as ‘a process to produce more, better quality homes in less time’, centres around the use of mass production off-site construction techniques such as panelised construction, blockwork, or insulated concrete/timber frameworks.

But it’s not only about speed and affordability; MMC also offers the opportunity to drive up environmental performance, efficiency, and sustainability.

All sounds great, but could MMC’s be a potential risk issue for the insurance industry? The answer is yes.

Not all properties built using modern methods of construction would be considered by an insurer as “standard construction”, so it’s vital brokers talk to their clients to build a detailed picture of their property and ensure the right cover is offered.

If in doubt, speak to your GI provider about how to assess the particular risks a property may pose and how to find the right cover at the right price.

New FCA product governance rules

General insurance intermediaries are now required to have updated systems and controls, as well as product governance frameworks, up and running to assess whether insurance products deliver ‘fair value’ for customers.

This FCA rules change marks a significant milestone in the drive towards a more customer-centric industry. However according to consultants KPMG, rather than having an immediate impact for good, it could instead lead to an uneven playing field in insurance, because some insurers are more stringent in their definitions of ‘fair value’ than others.

So, what does this mean for you and your clients? The reality is that whilst the ultimate responsibility to demonstrate ‘fair value’ is on the insurers, brokers have a responsibility to treat customers fairly, and evaluating fair, and even better ‘good’ value, is best practice whenever making recommendations and placing insurance for your clients.

Whilst you cannot influence an insurer’s policy wordings, if you feel that they’re not appropriate for a client’s needs then don’t offer the policy.

For example, don’t just add legal expenses or accidental damage for the sake of it, or because it’s ‘what you always do’ – make sure it meets the client’s needs and demonstrates fair value. The same applies to utilising industry standards such as defaqto five-star products.

Whilst clearly it’s best to use a five-star product when you can, it’s not necessarily providing a fair outcome for every client. I often refer to the example of a first-time buyer with a two up/two down mid terrace and on a limited monthly income.

Do they see value in paying more for a five-star all singing and dancing policy when there may be a two or three-star product that better suits their needs and wallet?

The new FCA rules emphasise what a good broker has always known – ensure you offer the right policy for the client and not simply make all your clients fit the same product.

The onus is on all of us to ensure as an industry we improve customer outcomes and product value, especially in the wake of Covid-19. Let’s all play our part in delivering ‘fair value’.

General insurance is foundation income

Let me ask you a question… do you consider general insurance to be a valuable income stream? If the answer is no, then my next question is – how can I enlighten you?

Is it because you’re nervous or lack understanding about placing insurance? Perhaps you’re worried about permissions? Maybe you simply don’t feel you have the time, or that offering general insurance protection is not worthwhile?

Whatever the reason, following the FCA pricing review, there is a huge opportunity for general insurance income to become foundation income, whether that be in offering standard, non-standard, quirky, high net worth or buy-to-let protection products.

Realise the opportunity by working with a GI provider. We are here to help you with:

· Product, policy and underwriting knowledge; build a successful and sustainable strategy for making general insurance a valuable asset in terms of reputation, relationship building and income.

· Technology, training and support; quote and buy quickly and easily for standard cases with tech-driven solutions, get dedicated support for complicated insurance issues, or introduce/refer a client so you can you do more business, in less time, and with greater financial return.

· Compliance and legal; build a compliant quote process, from fact-find, through product research, quote pack, demands and needs statements, key facts information, and policy documentation.

Your GI provider should be helping you make general insurance part of your foundation income. If they’re not, then maybe it’s time to switch.

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How lenders have changed their criteria in the face of rising cost of materials

Daniel Netzer is lending manager at Blend Network

In an ever-changing climate of rising building material costs, lenders should pay very close attention to the contract between the borrower and the contractor.

For example, in the US, the National Association of Homebuilders’ Construction Liability, Risk Management and Building Materials Committee recently published a contract appendix for property developers to use in their construction contracts that provides an ‘Escalation Clause for Specified Building Materials’.

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These changes to ‘fixed-price’ contracts act more like ‘cost-plus’ contracts where borrowers assume the risk of rising materials costs.

Ultimately, rising material costs threaten homebuilders’ ability to complete the project while maintaining a profit. Thinly capitalized developers may not be able to, or may not want to, absorb additional costs under ‘fixed-price’ contracts, particularly in high-demand markets where there’s an incentive to just walk away for more profitable works.

Generally, there are three ways lenders have adjusted and changed their lending criteria in the face of rising cost of materials to navigate the new more uncertain price environment.

The first way is to require higher contingencies and contingency reserve accounts. The second way it more integration on supply chain and materials used on site (e.g. where are the bricks made in? Are tiles made in Turkey or in the UK).

And the third way is by an increased focus on the financial standing of the borrower’s main contractor. So, our advice to borrowers right now would be: make sure you are using a contractor of fixed price and that you are comfortable the contractor can deliver with that fixed price, make sure that your risk as a developer is one that you are comfortable with, and finally and most importantly, make sure that your numbers are strong enough to sustain sudden and unforeseen price rises.

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You don’t know what you’ve got till it’s gone

Mark Snape is chief executive of Broker Conveyancing

Joni Mitchell was definitely not singing about the pandemic, but the sentiment still holds true, particularly through periods of lockdown that meant we were unable to see family, friends, colleagues and indeed – for all of us in financial services – continue personal relationships with clients.

That point has hit home with particular force, certainly since we began to have more time in the Broker Conveyancing offices and it was possible to chat across a desk, sit round a meeting table, and socialise outside of the business.

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It has been something of a revelation to be able to do just that and it has reminded me just how powerful our personal relationships are, especially within a work environment.

I think for many of us, meeting online via Zoom and Teams was a means to an end, and in our sector in particular, it certainly allowed us to keep on working and perhaps opened up a range of possibilities in terms of how we connect with people.

That six-hour drive across the country to meet a client might not seem so necessary now given all parties can dial in, and there is definitely both a cost and time saving to be had in doing that.

However, what price sitting down with someone, particularly for advisers and indeed within the office environment? It’s not surprising to me that, even with many firms giving employees the opportunity to work from home permanently, many are still choosing to come into the office at least a couple of days a week, because, a) it gets you out of the house and b) it alters the way you work and the benefits you get out of that work.

Zoom/Teams meetings can seem a little perfunctory. An agenda is worked through, and everyone signs off immediately once that is completed.

However, put everyone in a room together and not only can you develop relationships further, but you can spark off each, throw ideas around and generally get to a point which would be unlikely if you were doing this online.

I wonder if advisers feel the same way about client interactions? There is always a lot of talk about the transactional nature of delivering mortgage advice, and that may have a ring of truth to it, but I’ve never felt that the relationship between adviser and client was in any way ‘transactional’. Far from it.

In fact, the best advisers go out of their way to ensure that providing mortgage advice is not a ‘one hit wonder’ in which over the course of the next two/three/five years, you never have any further interaction until that mortgage is coming up for renewal.

To opt for this seems like a sure way to lose clients to me, particularly in an environment where lenders are so keen to secure product transfer activity which ultimately keeps the adviser out of the transaction.

And, of course, if you have a transactional approach to your clients then how can you possibly know about any changed circumstances, changed wants and needs? How can you delve into their financial lives on a regular basis and how can you find those ancillary sales opportunities that always come up when you do?

Nobody’s life stays on hold for two/three/five years, and the best advisers know this and ensure they have the communication strategy to stay in contact with their clients.

That may be offering them a face-to-face regular catch-up meeting, and I’m aware of many clients who would appreciate the opportunity to sit down with their adviser regularly, simply because ‘things happen’ and you also want to know that you’re in the best financial shape possible.

Look at what has been happening over the last few months in terms of remortgage competition. Any client is likely to be looking at the deals currently available and wondering if they could potentially save money.

It may be that they can’t do this right now – perhaps the ERC renders any saving irrelevant and is not worth paying – but being able to work that through for a client is going to be appreciated.

Even if it’s not worth it now, what are the chances they’ll come back to you to sort out their remortgage when they can? And if a shift now is worth it, then you as an adviser need not only sort out the remortgage, but also the conveyancing, and potentially any new protection/insurance, needs as well.

So, evidently, the social nature of our business is returning. We should not simply assume that what has worked over the last 12-18 months is going to satisfy clients in the future.

Give them choices and continue to build those relationships in as many ways as possible – you’re sure to get as much out of this as you put in.

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What House Can I Afford? Where to Buy, What to Buy, and How to Figure It All Out

The question of “What house can I afford?” is complicated. There’s much more to buying a home than just being able to afford the monthly payment on your mortgage. If price were the only factor, there’d be no need to look at different houses — you could simply purchase the first one available in your price range.

Instead, it’s important to consider the characteristics of a house that will best suit your needs, lifestyle, and your budget. What house can you afford in terms of size, location, layout, and features?

While we can’t exactly answer this question for you, we can lend some guidance. With the help of real estate experts and location-based research, we’re walking you through the process of how to evaluate exactly what type of house you can afford — and what “affording” a house actually means.

A balcony of a house that you can afford.
Source: (S O C I A L . C U T / Unsplash)

What determines personal home affordability?

What’s considered “affordable” when it comes to housing has a different meaning for everyone. But, in general, how much home you can afford according to a mortgage lender is determined by:

To a certain extent, what you are personally willing to pay is also a factor. Buying at the very top of your budget can be financially risky, whereas buying at the lowest end can lead to dissatisfaction — especially if that saved money means accepting less space than you wanted, or taking on more renovations than you may have anticipated.

We’ll dive more into how to determine what is most important to you when choosing a house, but for most homebuyers, landing somewhere in the middle is the sweet spot. That said, with the low interest rates and rising home prices we’re seeing in 2021, you might be able to think outside the box when it comes to choosing your next home.

“I think buyers today can be a little aggressive on not necessarily finding their forever house on the first purchase,” says Jennifer Carstensen, a real estate agent in Memphis, Tennessee, who works with 70% more single-family homes than the average agent in her area.

She explains that with home equity increasing steadily, the house you’re buying now doesn’t necessarily have to be the last home you ever buy — nor does it necessarily need to appeal to hypothetical future buyers.

“Let’s say a homebuyer wants to explore living downtown,” Carstensen offers as an example. “I would suggest, ‘Hey, let’s go for a one-bedroom right now.’ Whereas 10 years ago, I would have said, ‘Well, let’s think about your future buyer and who that’s going to be.

“The conversation has shifted from spending time focusing on the future buyer in order to get the highest resale value to, ‘We can be a little selfish today.’ Let’s not worry so much about your future buyer because the market is so great.”

In other words, it may be a good time to buy a house that you actually want based on your lifestyle today — instead of thinking in terms of an investment to resell down the road.

What else goes into home affordability?

Regardless of who ends up purchasing a particular house, there are certain factors that always influence the cost of a home.

We’ve all heard “location, location, location” in relation to real estate, and it’s as true today as ever. Where a house is located impacts not only its sales price, but also the cost of property taxes and homeowner’s insurance — which are ongoing expenses.

Other factors that go into a home’s overall affordability include:

So, bearing these factors in mind, let’s take a closer look at what house you can afford depending on where in the United States you live.

We’ll use the U.S. Census Bureau regions map for reference, as well as the current statistic that the median home size in the U.S. is 1,736 square-feet.

A tree line near a house you can afford.
Source: (Peter James Eisenhaure / Unsplash)

What house can I afford in the Northeast?

The median sales price of existing homes in the Northeast census region — which includes New England and the Middle Atlantic sub-regions — as of Q3 2021 is $387,200. For new-construction homes, that median figure increases to $502,300.

As we’ve just explained, location matters with real estate. Within the Northeast region, the median home prices vary quite a lot depending on your metro area:

What house can I afford in the South?

The Southern census region is rather sweeping with its geography, comprising the South Atlantic, East South Central, and West South Central sub-regions.

For existing homes, the median sales price across the South is $307,500. For new-construction, the median price is $367,800.

Taking a look at a few different metro areas, those median prices are quite varied:

What house can I afford in the Midwest?

The Midwest is divided into West North Central and East North central, but the median sales price of existing homes is $265,300, and for new construction that price is $347,100.

Here’s a metro-area breakdown of the Midwest:

What house can I afford in the West?

Split between Pacific and Mountain sub-regions, the West census region median sales price of existing homes is $506,300, while new construction homes price at a median of $522,400.

Unsurprisingly, different metro areas around the West vary in their own median prices:

A kitchen in a house you can afford.
Source: (Brian Zajac / Unsplash)

What should I consider when thinking about affordability?

So, we’ve looked at a range of home prices around the U.S. — but what does that really mean for you?

Well, no matter what home price statistics say about what is selling and where and for how much, the bottom dollar isn’t everything. When thinking about what house you can afford, you should be thinking in terms of your daily life — and understand that sometimes wants and needs are more similar than you might think.

Gain clarity on needs…

“You may need two bedrooms, but you really want four because you want an extra bedroom and an office — so we’ll talk about your lifestyle.” says Alice Cooper, a Daytona Beach-based top agent who doesn’t always take what her clients say at face value.

“Sometimes someone says they’ve got to have four bedrooms, but it turns out they don’t really need the fourth bedroom; what they need is a dedicated office. So now we can look at three-bedroom homes that maybe have an office, or an extra room somewhere that could be converted to an office.”

In other words, getting more clear on what you actually need in your home for it to be both comfortable and functional is key.

If you’re working from home regularly and would benefit from a quiet place to take calls and leaf through paperwork somewhere other than your kitchen table, it’s okay to shift from simply wanting an office to deciding that that space is a valid need.

If you’ve been promising your kids a dog for the past three years “just as as soon as we have a yard,” it’s okay to include a fenced backyard on your list of must-haves.

If your spouse is an enthusiastic home cook and wants a more usable area to prepare meals, it’s okay to prioritize a kitchen with counter space.

… And on wants

That said, unless your budget is unlimited, you will need to parse out which needs are actual needs, and which ones are passionate wants.

Or, perhaps, a misunderstood want.

“I had a client who told me they didn’t want any neighbors, they wanted some acreage,” says Cooper. “After looking at some property out in the county, we realized it wasn’t neighbors that were a bother, it was that they wanted to have a really nice view from the back of their home. They ended up on a golf course in a community with a beautiful, expansive view.”

One helpful tactic for discerning a want from a need is to think of each in terms of being a dealbreaker.

Remember, too, that sometimes a perceived downfall of a home can be remedied later.

Unfinished basements can be finished, dated bathrooms can be remodeled, and disappointing refrigerators can be replaced. It’s worth keeping an open mind to afford an otherwise great home.

What about floor plans? Is layout really that important?

There are countless ways to configure a home and its interior, so floor plan ultimately comes down to preference and, again, your lifestyle.

While open floor plan homes remain popular, they can be noisy and distracting. Some people love having their kitchen open to the living room to interact with family and guests while cooking — others prefer the sanctity of a more private cooking space.

A two-story home is ideal for creating separation between living space and private bedrooms, but stairs can hamper mobility.

A one-level home makes for an easier move-in process and more convenient movement throughout, but do you really want your main bedroom sharing a wall with your teenager’s room?

Remember, size isn’t everything. A thoughtfully designed floor plan can maximize use of space, and just because a home is 3,000 square feet, that doesn’t mean the square footage is going to be as functionally spacious as you’d expect.

It’s impossible to walk through every nuance of every floor plan here, but be mindful during your home search process and think through the functionality of certain details. Some quirks you can probably get used to — that Jack-and-Jill bathroom from the ’80s perhaps less so.

A large house that you can afford as a fixer upper.
Source: (Victoria Lea / Unsplash)

What if I want a bigger, better house?

So you’ve determined what you actually need and want from a house, you’ve talked to a mortgage lender to figure out what you can afford on paper, and you’ve found yourself an experienced real estate agent. Great! You probably have a good idea now of what house you can afford.

But what if you’ve decided you want a bigger or otherwise better house than you can realistically afford right now?

Well, there are a few things you can do to maximize your ability to afford more home — in whatever way “more” means to you.

Buy a fixer-upper

If you’re willing to get your hands dirty, you could look for a fixer-upper home and save yourself some cash on the purchase.

Cooper confirms that fixer-uppers are still “a great entry point to build some instant equity in the property.” Though she does warn that many sellers in 2021 are taking advantage of the hot seller’s market and putting repair or renovation work into their homes before selling in order to maximize sales price.

So, it may be more difficult to find a fixer-upper house at this time, but they’ll always be out there somewhere if you have the patience — and the clear head — to wait for the right one.

“A lot of times when we have a house that is fully renovated and ready to go, we’ll get multiple offers, which can sometimes cause emotional bidding and lead to buyer’s remorse,” warns Carstensen. “But, typically, if you can find a house that is maybe a little overpriced for the market and a little bit dated, you can get into it at a lower price and then do some renovations yourself.”

Just remember that those repair costs will have to come from somewhere (spoiler alert: your pocket) and you’ll need to be okay with the idea of living in a construction zone for the duration of your projects. It’s often worth it to save cash and create the home you really want, but there’s a reason why many homebuyers seek out a move-in ready property.

Improve your credit score

Generally speaking, the higher your credit score, the better interest rates you’ll qualify for on your mortgage. This can mean affording more home for the same price, so it’s worth considering a strategy for improving your credit score — even if that means delaying your purchase by a few months.

Increase your income

It sounds obvious, but it’s worth mentioning: The more money you make, the more home you can afford. Whether you take on a temporary second job to boost your down payment savings or you finally have a conversation with your boss about that raise you’ve earned, if you can increase your earnings, you may be able to increase the scope of your next home.

Decrease your debt

This one goes hand-in-hand with improving your credit, sure — but it also means you’ll owe less money each month. Ergo? You can usually afford more house.

Your mortgage lender can help talk you through this as they review your credit history during the prequalification process.

Save up a bigger down payment

The more you can afford to put down on your home, the lower your monthly payment and, as we mentioned much earlier in this piece, the better your chances of avoiding — or at least shortening the term of — paying mortgage insurance.

There are also lots of down payment assistance programs out there that can add to what you’ve already saved (try Googling “down payment assistance [city, state]” to get started), and there are even zero down payment mortgages if that’s something you’d qualify for — but talk to your lender to determine what might be best for you.

Consider moving to a more affordable area

Whether it’s another part of town or another region of the country, as we demonstrated with the home sales median prices across the U.S. census regions, housing prices vary widely depending on where the home is located.

To really maximize your home bang for the buck, it may be worth looking into relocation.

What house can I really afford?

There are a number of variables that will influence what house you can afford, and some are more under your control than others.

The best way to get started is to talk to your agent and your mortgage lender about how to maximize your spending power in relation to your budget and your lifestyle.

Header Image Source: (Trayan / Unsplash)

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Real Estate Return on Investment: What It Is and How to Maximize It

Most people in the market for property are simply looking for a place to live. But if you have higher aspirations for the money you are putting into a property, you may want to consider becoming a real estate investor.

But wait! Before you jump in with both feet, you must consider what the risks and the paybacks are going to be. In other words, what’s your return on investment (ROI), and how do you assess the ROI based on your particular investment strategy?

We asked two real estate and investment professionals to offer tips for discerning your ROI on various real estate investment scenarios.

Jodi Steinberg, a senior residential real estate agent in Kansas City with four decades of real estate experience, details specific client experiences with investment properties, and Nick Pietrocola, financial advisor and Vice President with Ameriprise Financial in Cleveland, Ohio, shares the advantages of real estate investment trusts as an alternative strategy. Let’s see what they had to say!

A calculator used to calculate return on investment for real estate.
Source: (Roman Skrypnyk / Unsplash)

Calculating real estate return on investment

There are a lot of ways to calculate real estate ROI, but as with any investment, the basic formula is “gain minus cost” — or how much you earn versus what you pay to invest in the property.

Stock investments can provide a simple example of ROI. If you invest $1,000 in the stock market and then five years later sell your shares for $1,500, your net profit is $500. Your $500 gain divided by your original investment of $1,000 is 0.50, or 50% ROI (10% per year).

Calculating ROI for rental or fix-and-flip properties is far more complex, with many variables to consider. Whether you are considering what to buy and when to buy, or whether to flip or lease, working with an experienced real estate agent can help you maximize your ROI and avoid possible pitfalls that could negatively affect your return.

Factors to consider when maximizing your ROI

Steinberg works with a variety of real estate investor clients, including those who buy for the purpose of fixing up and reselling, and those who intend to rent out homes, condominiums, or apartments.

The challenge for every investor, according to Steinberg, is to maximize the return on their investment. For a hands-off real estate investment, such as REITs (real estate investment trusts), this can be relatively straightforward. But when you get into strategies like buy-and-hold (also known as becoming a landlord) or fixing and flipping, there are many more variables to consider.

“When working with any type of investor, I feel like my first job specifically is to make sure that my client buys right, so when the time comes to sell, they can sell at a profit,” she explains.

This is a bit more critical for a fix-and-flip that you intend to sell quickly, but it is also essential for a rental property because you will also benefit from the accrued value of the property over time.

Steinberg first encourages her clients to consider location based on their investment strategy.

If you are intending to buy a house for the purpose of fixing it up and selling it, then it would be helpful to buy a fixer-upper in a neighborhood that is on the upswing so that you can hopefully find a buyer willing to pay a premium price for a renovated property.

“If you have a flipper who doesn’t know what they’re doing, and they buy way too high, they may not make much money on it,” Steinberg says.

Along the same lines, if you are trying to rent the property, you have to ensure the rental income you need to cover your investment is competitive in the location where you intend to buy, Steinberg says.

“It seems ridiculous to say — but location, location, location, is true,” she says.

ROI for rental properties

Your rental return on investment will depend on the price of homes where and when you buy, as well as the fair-market rental rates in the area. Buying wisely and fixing up prudently in desirable areas could generate the greatest ROI.

Calculate initial purchase

First, you will want to consider how much you intend to put down to buy the property and how much your monthly mortgage payments will be. Remember, a larger down payment means lower monthly mortgage payments.

Determine how much to invest

Secondly, consider how much you want to invest to fix up the property. This is where it can get tricky, Steinberg says.

She has one client who often invests heavily in the properties he purchases.

“He’ll paint everything and put in new cabinets,” she says. “He is against any carpet in rental properties, which I agree with. It costs a little bit more money upfront, but he puts hardwood [flooring] in everywhere, and tile in the wet areas. If you have renters for a couple of years and they have kids and dogs, the carpet will need to be replaced. But if you have hardwoods, they hold up over time.”

She said her client also makes sure the electrical system is up to date, as well as the HVAC and roof.

“He wants very little trouble after people move in,” she notes. “He gets good rent because he has a specific high-end area where he purchases.”

The upside to making a substantial investment in the property, Steinberg says, is that her client can charge a premium in monthly rent. That said, although he gets a good return on his investment, it takes him a few years to earn that return because he puts so much in up front.

To maximize ROI on more modest properties, she advises looking for homes that are in good condition, requiring only a minimum investment for cosmetic updates and repairs.

Analyze rent income potential

The third thing to consider is how much you can charge to rent the property. As Steinberg noted, this is often dependent on what the going rate is in the area you are targeting.

If you are purchasing a property with multiple units, you may also want to investigate the current tenant situation. Having renters in place will provide immediate income for your investment. If not, at least do the research to find out what renters paid in the past or are currently paying in the area.

Estimate additional and ongoing expenses

In addition to the initial investment in your rental property, there will be ongoing expenses you will need to take into account when calculating your ROI. Expenses to consider include:

Rental ROI calculation

ROI can be calculated in diverse ways. Here are general examples based on annual income and expenses.

Cash purchase

When you buy a house with cash, your upfront investment is heavy, but you won’t have the monthly expense of a mortgage. Let’s use this simplified example:

Mortgage purchase

With a mortgage, you’re putting much less money down upfront, but you’ll have monthly mortgage payments to make to your lender. Here’s an example of ROI on a mortgage property purchase.

A hammer used to repair real estate.
Source: (iMattSmart / Unsplash)

ROI for fix-and-flips

Your return on investment for a fix-and-flip will also depend on the price of the home you buy.

Calculate initial purchase

As with a rental property, you will first need to decide how much you intend to put down to buy the property, how much of a monthly mortgage payment you can afford, and how long you will have to make those payments until the house is resold.

Since you are intending to sell the home in short order, it is important to work with your real estate agent to assess the market carefully.

How quickly are homes selling? Are prices increasing, plateauing, or decreasing? Before you decide how much you will invest in fixing up the property, you must have an idea what you will be able to sell it for to ensure a healthy ROI.

Determine how much to invest

Now that you have a realistic resell price in mind, you can decide how much you can afford to invest in fixing up the property and still make a profit.

You may want to enlist a general contractor to help you determine the total cost of all intended repairs.

“I have an investor who bought a townhome in a great area — a golf course community,” Steinberg says. “I was uncomfortable with his decision to purchase it because it had foundation problems. I said, ‘Look, you’re going to have to put a large amount into it to get this fixed, plus what you intend to do to the inside.’

“He went ahead with his plan anyway. He was intending to flip it, but the property sat on the market for a while. He ended up renting it, but unfortunately for quite a bit less than he had hoped to gain.”

And finally, be realistic about how long it will take to make those repairs. You will be making mortgage payments for the duration of the repairs and until the house is placed on the market and sold.

Fix-and-flip ROI calculation

ROI generally is a fairly simple calculation for a fix-and-flip, although the length of time it takes to complete the renovations could make this calculation a little more complicated.

Cash purchase

Let’s say you’re paying cash for a fix-and-flip — this means you won’t have to make those monthly mortgage payments.

Mortgage purchase

With a mortgage purchase, the amount of time you hold onto the flip can really affect your bottom line, especially if you used a high-interest loan to buy it in the first place.

A bunch of houses that will earn a return on investment.
Source: (Ross Sneddon / Unsplash)

How to maximize your ROI

For both rentals and fix-and-flips, there are ways you can maximize your ROI.

To begin with, consider a more modest property in the neighborhood, rather than the most expensive. It’s more challenging to get the rent price you need if you buy a property in the top range, or to get a reasonable profit when you are trying to sell the most expensive house on the street.

In addition:

Steinberg notes that one of her clients asks her to negotiate a provision in the contract that allows him to start working on the house immediately if it’s vacant.

“We like to get the seller to agree to it so that on day one, he can list it for rent, and get somebody in there quickly. He doesn’t want it sitting empty,” she adds.

Real estate investment trusts

Real estate investment trusts, or REITs, are yet another way to invest in real estate.

A REIT owns and manages a portfolio of properties for  investors. These portfolios can offer a single vertical — for instance all apartment buildings or all retail sites — or they can carry a mix of property types.

Pietrocola says one advantage of investing in a REIT as opposed to directly owning property is that REITs can be more predictable.

“We look at it as an alternative investment,” Pietrocola explains. While REITs may generate positive returns, “it’s very passive compared to owning rental property.”

“With a REIT, I can have real estate investment without worrying about repairs. However, some people prefer direct ownership because they have a tangible asset and a tax benefit that they wouldn’t have with a REIT.”

Pietrocola says publicly traded REITs pay in two ways: either a dividend or a return of capital. If the value of the properties in the REIT also appreciates in price, that adds to your total return, he explains.

But your ROI depends on several factors, according to Pietrocola, and it’s wise to study the market and solicit expert advice before deciding where to invest.

“Prior to the real estate crash of 2007 to 2009, REITs had generated about 9% a year,” Pietrocola notes. “That number dipped to a little over 7% over the long term. In the past few years, it has been tracking to the double-digits, as high as 14% or 15% in some cases. Now it is starting to get skewed back down the other way due to the pandemic.”

Pietrocola says your ROI will depend on the individual REIT — not only the type of properties in the REIT, but how that REIT is structured. He recommends studying the Morgan Stanley REIT index to get an idea of the range of REITs available.

Because of the current volatility related to the recent pandemic, including the change in shopping habits and work-from-home trends, he says that investment-class real estate may well struggle for the near term.

“I have talked to a few people locally who are in that business,” Pietrocola explains. “One person told me just to keep tenants in their buildings, they have had to renegotiate everything at 50 cents on the dollar. Especially in retail, I don’t expect those dividends are going to be very steady for a while.”

Crowdfunding and peer-to-peer lending

One of the most recent developments in real estate investment is the advent of crowdfunding and peer-to-peer (P2P) lending.

Both strategies offer a way for smaller investors to have an entrée into larger real estate projects through investment platforms.

P2P lending platforms match up borrowers with investors. According to Financial Samurai, the returns on P2P lending in the real estate industry have been in the range of 7% to 8%. For the borrowers, it often allows them to access investment funds at somewhat lower rates.

Crowdfunding platforms are often equity-based, meaning you become a part owner of the project. Some crowdfunding platforms also allow multiple investors to fund mortgages secured by real estate for a host of different projects, from fix-and-flip homes to larger commercial projects.

There are more than 75 crowdfunding platforms in the U.S. specifically designed for real estate investors.

As with all investment strategies, it is critical that you work with a professional financial advisor and do your homework thoroughly before investing.

A real estate office where you calculate return on investment.
Source: (Yibei Geng / Unsplash)

Final thoughts

If you decide to become a real estate investor, it is important to understand what your appetite is for the arduous work of fixing up and managing properties, versus the hands-off form of investment characterized by REITs and crowdfunding.

If you do favor ownership, Steinberg highlights the importance of working with a knowledgeable real estate agent.

“If your agent has the credentials, has done this for a good amount of time, and you trust them, then listen to them,” she says.

“Let them pull all the comparables. Let them give you their thoughts on where the neighborhood is going, the quality of the schools. It’s important to listen to the person that does it day in and day out. Let them do the research and the legwork for you. We love what we do. So let us do it.”

No matter what kind of real estate strategy you choose, make sure you do plenty of research up front. And as Steinberg advises, getting an experienced and trusted real estate agent to assist you in the process will go a long way to help ensure a healthy ROI.

Header Image Source: (Nicolas Solerieu / Unsplash)

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What does the end of the stamp duty holiday mean for the market?

Peter Joseph is chief executive of The Moving Hub

When the stamp duty holiday ended on 30 September, the property industry could finally breathe a sigh of relief. The market surged following the introduction of the tax break, combined with the release of pent-up demand during the height of the pandemic.

It successfully re-energised the market following its closure during the first national lockdown, keeping the economy moving. However, recent months saw many speculate on the future of the market following the stamp duty holiday deadline. Now it is time to consider what the end means for the industry.

What does an extension of the stamp duty holiday mean for conveyancers?

The stamp duty holiday cliff-edge

Fears of a cliff-edge started to be heard at the beginning of the year, as the original deadline approached. With thousands of prospective buyers at risk of not completing in time to benefit, the number of purchases with the potential of falling through was concerning.

These concerns fuelled calls from industry professionals to extend the planned deadline and taper it to avoid a hard stop. The thinking behind it was that it would give more purchases the chance to complete, which were already in progress.

When the extension and subsequent tapering were announced, the industry rejoiced. Although a minority of transactions did fall through, the completions prevented a knock-on effect for the rest of the market.

The imbalance of supply and demand

The shortage of properties coming to the market is now in a fifth consecutive month. Latest reports show current numbers are lower than pre-pandemic levels, with prospective buyers remaining motivated to make their purchases.

But, while demand remains high, property prices have also risen. The average house price has increased by almost £30,000 since June last year, one month before the introduction of the stamp duty holiday.

While purchasers persist to buy their next properties, house prices may be set to increase further. This inflation has raised concerns for the future of house prices, but the market has not yet run out of steam.

However, prospective sellers may still be encouraged to list their properties. At present, the market is less frantic from not being in the height of the pandemic, is more appealing to sellers.

Now the stamp duty holiday has ended, what is in store for the market?

The seller’s market is predicted to remain for a few more months at least and could span into the new year. However, if conditions remain as they are, the buyer’s frenzy is likely to wane.

While this may not result in property prices going down, it will help achieve equilibrium in the market. Still, many uncertainties remain, such as the possibilities of potential future lockdowns.

Another lockdown could spark the same desire in people to move on from their current property and reignite the market. This could delay the hope of achieving balance in the market considerably, but only time will tell.

After a turbulent 18 months across the property industry, a sustained and stable market is something we are all eager to see.

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Coming out of the pandemic

James Rainbird is managing director of Pink Pig Loans

As we come out of the pandemic, it’s been somewhat obvious that the number of borrowers who have picked up some sort of adverse credit has grown.

In many cases, through no fault of their own, payments may have been missed on credit cards or mobile phone bills, or other types of credit.

Avalanche of numbers

For the most part those missed payments will be caught up with over time however they will still appear on credit reports and, from a mortgage perspective, that needs to be dealt with.

To give you some idea of the scale of this issue, look no further than Pepper Money’s most recent Adverse Credit Study which estimated that 6.29 million adults in the UK have experienced adverse credit within the past three years. Of these, more than 880,000 intend to purchase a property to either live in or let out in the next 12 months.

You can see that, from a specialist lending advice, perspective there are clearly opportunities and advisers are going to be in demand, mainly because many of these borrowers have never been in such a position before and are unsure about their situation with regards to securing a mortgage/remortgage.

These figures also suggest that a large proportion of people with adverse credit issues have assumptions over the impact missed payments or a County Court Judgement (CCJ) can have on their mortgage prospects and are not even attempting to apply for a mortgage. That is a more worrying trend and needs to be nipped in the bud.

When faced with such clients, the important thing is that advisers do not simply conclude that they cannot help them find a mortgage. The good news is there is a growing number of specialist lenders who take a pragmatic approach to credit repair and are willing to consider applicants with blips on their record.

For example, we have recently been finding solutions for clients with adverse credit with lenders such as Together, United Trust Bank, Central Trust and Norton.

These and certain other specialist lenders have a real appetite for helping the clients that the high street aren’t interested in. We’ve been able to find rates at well under 4% with such lenders who don’t credit score but take a view based on affordability.

With increasingly competitive rates and criteria out there for adverse clients, advisers should make sure they are looking to these lenders for these types of solutions, else risk the distinct possibility that the clients will go elsewhere and find someone who can help them.

In addition, our experience is that such borrowers are loyal to those who help them and maintain their relationship once their credit issues are ironed out and are looking to remortgage with a more mainstream lender.

For those with little experience in dealing with such cases, my advice would be to partner with a specialist mortgage packager such as Pink Pig Loans.

While we have traditionally been known as a second-charge mortgage distributor, we are packaging ever-increasing volumes of first-charge specialist mortgages.

While I’m not in the habit of making grand predictions I do feel 2022 will see specialist lending become much more mainstream. A combination of COVID-related job insecurity, dramatically rising energy bills and imminent interest rate rises will pile increasing pressure on borrowers.

With interest rates at historic lows since the Credit Crunch of 2008-2009, there are many thousands of borrowers who are unused to rates that were the norm in the decades before Northern Rock and Lehman Brothers collapsed. Even a modest increase to a Bank Rate of 1% will potentially have a significant effect on individuals’ affordability.

In such an environment, advisers who aren’t put off or phased by clients with adverse credit will find there are real solutions out there and their clients will be extremely grateful for their help.

My advice is to research the market and raise awareness with your clients about the options available. If you don’t feel comfortable with the process, then partner with a specialist. You won’t regret it.

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16 First Time Home Buyer Programs to Help With the Down Payment, Mortgage, and More

A little help can go a long way when it comes to buying your first home. Applying for a mortgage and saving up for a down payment can feel intimidating at best, impossible at worst. Fortunately, there are first time home buyer programs designed to make the process a little less stressful — you just need to know what they are and where to look.

With the help of Joseph Baylis, a top agent and first-time homebuyer extraordinaire based in Trenton, New Jersey, we’re giving you a rundown of the best first-time buyer programs that are available as of October 2021.

Two people researching first time home buyer programs.
Source: (DISRUPTIVO / Unsplash)

First, a brief introduction

First-time homebuyer programs are just that: programs designed to help people purchase their first home.

Many programs are government-backed, while others are funded through housing authorities or financial institutions. Some programs are offered on a national level, others are statewide, and some are hyper-local to a particular area.

Each program will have its own set of qualifications, which will involve factors like your credit score, income, down payment amount, the price of your desired home, and more. Some require eventual repayment, and some are as good as gifts.

Bottom line: first-time homebuyer programs are all different, and they’re all subject to change with regularity. While finding an experienced real estate agent is key to your purchase process, your best bet for gathering the most accurate, up-to-date information on homebuyer programs is always to start by talking to a mortgage professional.

“When it comes to mortgages, the programs change [frequently] and I don’t want to misinform anyone,” says Baylis, who advises his clients that programs may be available that are a good fit for their needs — but that, as a Realtor®, he’s not necessarily the best resource for lending-related questions.

“As a first step, I always put new buyers in touch with my mortgage professional, who can provide those answers.”

Now that we’ve covered the basics and disclaimers, let’s take a closer look at actual first-time homebuyer programs.

FHA loans

FHA stands for the Federal Housing Administration, which is part of the U.S. Department of Housing and Urban Development (HUD). The FHA backs mortgages to allow lenders to offer a favorable deal to homebuyers.

FHA loan advantages include:

Because these loans are so accommodating, they’re a good fit for many first-time buyers. Saving for a down payment is often the biggest challenge for prospective buyers, so being able to get into a home for potentially less than 4% down can offer the ability to buy a house much sooner rather than later.

“We probably would have had to wait longer to purchase our first home if we didn’t use the FHA program,” says Imani Francies, a recent Atlanta-area homebuyer. “With the high cost of renting and keeping up with bills, saving for a higher down payment would’ve probably taken us a couple of years.”

Of course, qualifications do apply. To be considered for an FHA loan, you must:

Your mortgage professional can give you more details — and offer advice to set you on a path to qualification if you’re not ready for an FHA loan just yet.

As a heads up, in a seller’s market where competition for homes is high and multiple offers are likely, your real estate agent may encourage a little extra legwork to appeal to the human side of the seller when it comes to submitting an offer on your hopeful home.

“Many first-time buyers I work with are FHA,” says Baylis. “They’re getting starter homes and going against buyers who may be moving up and have 20% [as a down payment]. It’s hard to compete. We ask buyers to write a letter when they put an offer in.”

Do keep in mind that while writing a letter can be an effective tactic, compliance with the Fair Housing Act is essential.

USDA rural housing loans

Yes, we mean that USDA: the U.S. Department of Agriculture.

If you’re hoping (or willing) to buy in a rural area, a USDA home loan may be helpful for you as a first-time homebuyer. And you might be surprised by how flexible the definition of “rural” is!

USDA loan qualification requires that:

Because the USDA home loan program is designed to help lower- and middle-income families purchase homes, there are income limitations. For a household of between one and- four people in 2021, $91,900 is the limit. For between five and eight in a household, the limit is $121,300.

Remember, limitations and guidelines are subject to change. Talk with your mortgage lender if you think a USDA loan might be right for you.

A U.S. flag in front of a house, where they may have used a first time home buyer program.
Source: (Debby Hudson / Unsplash)

VA loans

The Veterans Benefits Administration offers a home loan guaranty benefit to current and veteran service members, and there are several advantages to this program:

Eligibility is determined by duty status and length of service, income, and credit history. Those who qualify will receive a Certificate of Eligibility (COE) from the VA to present to their lender of choice.

Speak with your mortgage advisor for more information, or contact VA home loans service.

HUD homes

Remember the earlier mention of HUD along with FHA loans? HUD homes are properties that are being sold by federal agencies — not private individuals.

Typically, these are foreclosure homes that came into HUD’s possession following default on an FHA-backed mortgage.

HUD homes can be a good opportunity for first-time buyers, but there are a few significant purchase restrictions:

As you’ll expect by now, HUD home requirements and restrictions can and do change regularly. Visit HUD’s guide to buying a home to learn more.

Good Neighbor Next Door

The HUD Good Neighbor Next Door program helps eligible public servants, first responders and K-12 teachers purchase certain HUD homes with a 50% discount.

The “discount” isn’t in the form of a slashed sales price, however — it’s handled through a silent second mortgage. While you will have to sign your name to this note, no interest or payments are due as long as you fulfill the minimum occupancy requirement of three years.

Buyers must agree to live in the home following purchase, and the property must be located in a qualifying revitalization area. The idea behind this program is that individuals who already serve the community on a professional level can also help enhance a neighborhood by caring for a home in an area that can benefit from stability and development. In return, these homebuyers enjoy a significantly reduced cost of living.

Requirements are strict, and home availability changes weekly, so start with the FHA FAQ if the Good Neighbor Next Door program sounds like a fit.

Section 184 Indian Home Loan Guarantee

Also a HUD program, the Indian Home Loan Guarantee assists Native American communities with home purchase opportunities. HUD’s office of Native American Programs guarantees these mortgage loans, and it works directly with the Bureau of Indian Affairs if tribal land is involved.

Eligible borrowers are American Indians or Alaska Natives who are members of a federally recognized tribe and who apply to purchase a home in an eligible area.

Applicants must work with a HUD-approved Section 184 lender, and mortgages are limited to fixed-rate loans of 30 years or less. Loan limits are determined by county.

VA Native American Direct Loan

Open to eligible veterans, the Native American Direct Loan (NADL) assists homebuyers with the purchase or construction of a home on Federal Trust land.

As this is a VA program, requirements for eligibility are strict, and all conditions must be met, including:

For more information, contact your regional loan center with questions.

A house in need of repairs, which may qualify for a first time home buyer program.
Source: (Steven Cordes / Unsplash)

FHA Section 203(k)

This program, 203(k) Rehab Mortgage, should be on your radar if you’re interested in purchasing a home that needs extensive repair or renovation.

The benefit of Section 203(k) is that homebuyers — first-time or otherwise — can roll both the purchase of the property and the cost of home rehabilitation into one mortgage.

The home in question must be at least one year old, and the minimum cost of necessary repairs is $5,000. In addition, total property value must meet the parameters of local FHA mortgage limits.

Fortunately, the list of eligible rehabilitation activities is quite generous, which makes Section 203(k) one of the more flexible programs. You will need to work with an FHA-approved lender, but once approved, you’ll be able to:

The FHA resource center — or your lender — is a good place to start to learn more.

Fannie Mae HomePath and HomeReady

Similar to HUD homes, Fannie Mae HomePath homes are foreclosures owned by Fannie Mae.

The HomePath program aims to restabilize neighborhoods and help homebuyers from all backgrounds. Though HomePath homes are available to anyone who is interested in and qualified for purchase, the HomePath Ready Buyer Program — in combination with a HomeReady mortgage — is especially valuable for first-time homebuyers.

Features of a HomeReady mortgage on a HomePath home include:

To help create more stable homeowners, an education requirement is involved with a HomeReady mortgage. With few exceptions, first-time buyers must complete an online course through Framework that takes between four and six hours to finish.

Your lender can provide you with more information on Fannie Mae HomePath homes and a HomeReady mortgage.

Freddie Mac HomeOne

Freddie Mac HomeOne is a low down payment mortgage option for first-time homebuyers. Qualified buyers are not subject to income limits or geographic restrictions and can put down as little as 3% on their home purchase.

Similar to the Fannie Mae HomeReady program, first-time buyers through HomeOne will need to complete a homeownership education course (this free program through CreditSmart is acceptable).

Check out the Freddie Mac HomeOne FAQ to learn more about this versatile program, or talk to your mortgage professional.

Freddie Mac Home Possible

For low-income buyers, the Freddie Mac Home Possible program provides an opportunity to become a homeowner.

As with the HomeOne program, buyers can put down as little as 3% — but Home Possible is more flexible with income sources and co-borrowers, which means there’s greater opportunity to buy.

There is an income limitation not to exceed 80% of the area median income in order to qualify for Home Possible, but the program is otherwise quite flexible. Check the FAQ for more details.

Money, which could be part of a first time home buyer program.
Source: (engin akyurt / Unsplash)

Down payment assistance grants

These programs will vary by state, but a down payment assistance grant is exactly what it sounds like: money to help you with your down payment that you do not have to repay.

Down payment grants are usually reserved for first-time homebuyers, and, depending on the terms of the specific grant, may include income limitations, a cap on the home purchase price, and the property may have to meet certain criteria — such as being a single-family home or located in a particular area.

Because down payment assistance grants are so regional and change frequently, this is a great conversation to have with your mortgage lender. You can also run a Google search for “down payment assistance grants [state]” to get an idea of what may be currently available in your state.

Down payment assistance loans

These are similar to down payment assistance grants, but with one major difference: you may have to pay back a down payment assistance loan eventually (some are forgivable once you meet certain requirements, and others allow you to defer payment until you sell or refinance). Depending on how much you’ll need (or want) to put down on your home, a down payment loan may or may not be a good idea.

Again, like grants, down payment assistance loans are localized and subject to regular change, so you’ll want to ask your lender about these opportunities — or Google search “down payment assistance loans [state]” as a starting point.

As ever, expect to navigate credit worthiness, limits on income, purchase price, and location of the home.

Homeownership vouchers

Under the HUD umbrella, homeownership vouchers offer individuals assisted by Section 8 public housing an opportunity to use their vouchers toward the purchase of a home.

Homeownership vouchers are not supported by every public housing agency (find the ones that do here), users must be first-time homebuyers, and there are very specific employment and income requirements.

To find out more about HUD homeownership vouchers in your state, check the HUD listing.

State housing agencies

State housing finance agencies are an excellent resource to learn more about first-time homebuyer programs and other affordable housing efforts.

The National Council of State Housing Agencies (NCSHA) provides links to and information on each state’s official housing agency, as well as details on what, exactly, is the function of these agencies.

NCSHA is a great place to start if you’re exploring local opportunities for first-time homebuyer programs and want to have an overview before speaking with a lender.

Local housing authorities

Even closer to home than state housing agencies, local housing authorities operate on a county or even city level. Depending on available funding and homebuyer eligibility, ultra-local first-time buyer assistance programs may be on offer.

Find your local housing authority through the HUD state information listing, or Google search “housing authority [city, state].”

Conventional loans

To wrap up our first-time homebuyer program list, we’ll end with conventional loans.

These are simply private mortgage loans that are not backed by the government. They break down into two major categories:

Conventional loan qualification for 2021 starts with a credit score of 620 (though 740 or higher will yield a better interest rate), proof of reliable income, and you should plan on putting at least 5% down. Putting down 20% will allow you to skip the mortgage insurance, but as a first-time buyer, that percentage could mean a longer wait until you’re ready to buy.

Your mortgage lender can assess your financial situation and credit history to help you determine if a conventional loan is the best option.

Two people discussing their first time home buyer options.
Source: (Ubiq / Unsplash)

Lots of options, lots of opportunity

While the seemingly endless array of first-time homebuyer programs may feel daunting, take heart — the more options that are available, the more opportunities you’ll have to leverage your way into your homeownership.

If we’ve said it once in this article, we’ve said it a dozen times: An experienced mortgage lender is going to be your best ally through this process. If you don’t yet have a trusted lender, talk to your real estate agent, or simply ask around.

A friend or colleague who recently purchased a home may be able to refer you to someone great, and your current bank or credit union can do the same. Most financial institutions will have an in-house lending advisor or a list of reputable referrals.

Good luck on your homebuying journey!

Header Image Source: (Andy Dean Photography/ Shutterstock)

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