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6 Reasons to use your VA Benefits

houseWhen it comes to finding a home for you and your family, getting the best possible mortgage sets you up for success. For those who are eligible, a VA (Veteran’s Administration) mortgage loan offers a number of enticing benefits that may make sense for your home purchase. Here are some of the biggest advantages of VA loans:

1. No money down required. Coming up with a large down payment is a huge barrier for many home buyers. For a $200,000 home, a standard 20 percent down payment is $40,000. That is a lot of money for most families to save up. With a VA loan, so long as the purchase price doesn’t exceed the appraised value of the home, no down payment is required.

2. No private mortgage insurance (PMI) required. With traditional loans, if you require financing for more than 80 percent of a home’s appraised value, you’ll most likely be required to pay PMI monthly, which protects the lender if you default on the loan. This can cost many borrowers an extra $100 to $200 a month though some lenders have options that do not have a PMI requirement. VA loans, on the other hand, do not require PMI, even when receiving a loan for the entire appraised value of a house.

3. Strict limits on closing costs. Closing costs for traditional mortgage loans can add up quickly, but with a VA loan, strict limits are imposed on what closing costs are allowed.

4. Lower interest rates. Because VA mortgages are partially guaranteed by the VA, lenders are encouraged to offer more favorable terms than conventional loans. This can often translate into lower interest rates than those for conventional mortgages.

5. Potentially lower minimum credit score to qualify. The VA doesn’t set a minimum credit score requirement, although many VA lenders have guidelines for minimum credit scores for qualification. Your lender may look past your credit score to see your unique financial situation to help get you the best VA loan possible.

6. No prepayment penalty. Traditional mortgages may penalize you for paying off your loan early, but with a VA loan, there is no penalty for eliminating your mortgage ahead of schedule. If you’re able and decide that you want to pay off your mortgage, you’re not forced to keep unnecessary debt.

Ready to get started on your path to home ownership? Start with getting pre-approved for a mortgage that fits your needs and goals.

Article provided by Navy Federal Credit Union. When shopping for a VA home loan consult your local REALTOR for information on which lenders provide the best and quickest service for you and your family. Your working REALTOR has experience with multiple lenders and can provide you with a wealth of information on the lenders loan servicing time and their clients overall satisfaction with the lenders.

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Credit Requirements for VA Loans Explained

scoreIn the past when a veteran wanted to use the VA home loan benefit in order to buy and finance a home with nothing down, the VA would ultimately approve the loan application. The VA would not just issue the approval but order the appraisal and set the VA interest rate for the loan. You can imagine the time it would take just to get a loan approval from the VA and one of the reasons many sellers at times would refuse an offer on a home if the buyer was using a VA loan for the purchase—it simply took too long.

Today however, the approval process is completely performed by approved VA lenders. The VA doesn’t approve the loan but does issue the requirements that lenders must follow if the lender expects to receive the VA loan guarantee. From debt ratios to employment history, it’s all up to the lender. And that of course includes the creditworthiness of the borrower. What are the credit requirements for a VA loan?

The Evolution of Credit Scores

Prior to the introduction of credit scores, a VA lender would review a credit report line item by line item to manually evaluate a credit report. The credit report contains information about a trade line, how much is owed, the monthly payments and whether or not the payments were made more than 30, 60 or 90 days late. The report also listed any outstanding or paid collection items, charge-offs and judgments. If the underwriter saw any derogatory credit, unless it was a missed payment or two, the loan would likely be declined.

The FICO company devised a complex analysis of payment patterns to produce a three digit number reflecting a borrower’s credit past as a way to predict the future. This number ranges from 300 to 850 and the higher the number, the better the credit. The three main credit agencies, Experian, Equifax and Transunion all use the FICO model and report their scores to a VA lender when asked. The numbers will be similar to one another but rarely exactly the same. Because information can be reported differently and at different times to the credit agencies by creditors, the three digit numbers will be slightly off. For example, a VA lender might receive three scores of 734, 746, and 752. The lender will use the middle score and throw out the lowest and highest.

The VA doesn’t set a minimum score but VA lenders do. Most VA lenders require a minimum 640 credit score but still others have a 620 rule. That means if your scores are low and the VA lender declines your loan because your score is 635, another VA lender could approve your VA loan request because the 635 score is above their 620 minimum.

Regarding Bankruptcies, Foreclosures and VA Loans

It’s true that a bankruptcy or a foreclosure can stay on your credit report for seven years but that doesn’t mean you have to wait that long in order to use your VA home loan benefit. In fact, in the instance of a foreclosure, you may qualify if more than two years have passed since the foreclosure date. If you used your VA entitlement and it was involved in the foreclosure, the amount of the entitlement in the foreclosure must be redeemed.

VA loans allow for a bankruptcy in the past as long as two years have passed since the discharge date and credit has been re-established. This is very important. A VA lender will have a difficult time approving a VA loan if there is even one late payment over the past two years. The most important payment to keep current is your rent in addition to your utility payments and mobile phone bill. Some VA lenders can use such payments as evidence of timely payment and is called “alternative” credit. A bankruptcy or a foreclosure will hurt your scores, but eligible veterans can repair the damage to the credit report sooner rather than later. It’s done every single day.

Article Credit: Grant Moon,  Army Reserve Captain and CEO of VA Loan Captain, Inc.

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If you’ve lived in your home for 10 years or more, it’s likely outdated with today’s buyers. The truth is, though, you don’t need a massive remodel or renovation to sell your home for top dollar. Actually, smaller updates and repairs tend to have a higher return on your dollar than the bigger ones.

I’ve put together a list of the most effective upgrades you can make to maximize your money when the time comes to sell. These upgrades give you the best chance to get a positive return on the money you put in.

Homes for sale in the best school district in San Diego

I’ve grouped them into two segments – the smaller, quicker fixes that can be done for under $500, and the larger, more substantial ones that can be done, but will cost you a little more than $500.

Remember – these are the kinds of things that will earn you your money back and more when it comes time to sell:

$500 or less:

  1. Bring out a real estate professional (FREE): We’ll tell you exactly where to spend your time and effort to maximize your return.
  2. Deep clean/carpet clean ($200): Professionals will make the house shine, and show buyers that maintenance is important to you.
  3. Fixtures, knobs, pulls, switches, outlet covers ($300): You can modernize your house and make the fixtures uniform throughout; a detail that buyers will notice, and love.
  4. Gardening ($200): Well worth the professional service. Your curb appeal makes the first impression!
  5. Paint ($500): Offers the best return on investment, hands down. Go with soft, neutral colorize to appeal to the most buyers possible.

$500 and above:

  1. Get rid of popcorn/textured ceilings ($1,500): Instantly brings your home out of the 1980s.
  2. Bathroom upgrade ($2,000): Bathrooms are small, but they sell homes. Since they are small, you can paint, replace your vanity, get new faucets and figures, and sometimes even replace the tile for under $2,000. Other options include reglazing the tub, replacing the mirror, or adding a towel warmer.
  3. Kitchen upgrade ($3,000): Kitchens also sell homes, and you can upgrade without going overboard. Choose one or two key features to update, like a new stainless steel fridge, refinishing wood floors, replacing tile, or refacing cabinets.

All these upgrades are easy value adds, but the value of each one depends on your unique situation and what buyers are looking for in your area.

Homes for sale in the best school district in San Diego

To truly get the best idea of where to spend the smart money that will net you even more money when you sell, bring out a real estate professional for an expert plan. I’d love to share my expertise in the market with you and help you find the best places to make inexpensive repairs. Give me a call, send a text or send an email – let’s talk soon!

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May & June Home Maintenance

hvacfilterClean or replace your HVAC filters. You need to do this more often than once a year. A dirty filter forces your HVAC system to work harder, which in turn drains your wallet. It could also shorten the life of your blower motor.
dryerventClean your dryer vent. Not all lint is caught in the lint trap; some makes its way into the dryer vent. A clear vent will save you money by reducing the time your dryer has to run. A plugged vent not only wastes money, but could also cause a house fire.
washingmachinehoseCheck the washing machine fill hose. Look for cracks that could become leaks. A leaky hose under pressure can cause major damage in a short period of time.
screenrepairClean and repair your screens. Trying to reduce your electric bills this summer? In many parts of the country, you can keep your house cool (at least at night) by opening windows. Gently scrub on a flat surface with soapy water. Also, patch small holes, as needed.
cleandriveway Clean decks, driveways, fences and other outside surfaces. A pressure washer makes the work much easier. If you don’t have one, borrow one from a neighbor or rent one from a home center. While you’re cleaning, inspect for damage that needs mending.
paintpeel Repair any cracked or peeling paint. A good paint job makes your home look nice, while providing a protective barrier from the elements. Touch-up painting is easy to do and inexpensive.
fridgecoils Vacuum your refrigerator coils. The coils you’ll find on the bottom or back of your refrigerator conduct the hot air from inside the unit. If they’re coated with dust, they do the job less efficiently and cause your fridge to work harder. That means a higher electric bill for you. Use a vacuum cleaner hose or a brush to clean the coils.
smokedetctorReplace the batteries in your smoke detectors. You never know when you’ll need them. Sometimes, it’s a matter of life or death, so take the time to change the batteries now.
lawnmowerPrepare your lawn mower for summer. Change the engine oil and sharpen the cutting blade. You’ll lengthen the life of the mower and improve the look of your lawn.
windowseal Check seals around windows and doors. Winter weather can crack and harden caulk and other weather seals. Inspect them now and repair and replace as needed. You’ll reduce your air-conditioning bill and could prevent water from entering your home and causing damage.
acgrowth Clear vegetation around your AC compressor. To work efficiently, the compressor needs good airflow. Prune any plant growth that could block it.
waterheaterdrain Drain your water heater.

Sediment builds up in your water heater tank. Use the spigot near the bottom of the heater to drain it. By doing so, you’ll prolong its life and reduce your electric bill.
patio-furniture Clean your patio/lawn furniture. It’s time to dig out the patio & lawn furniture to prepare for your outdoor leisure time this spring/summer. Use a mild detergent and soft brush to clean off any dirt accumulation then spray with the garden hose. Don’t forget to clean the umbrella too!

summerrelax Now that the chores are done, it’s time to kick-back, relax and enjoy the beautiful southern California weather!

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March by the Numbers

New home sales continued to turn in disappointing performance, while lay-offs were at historic lows, and incomes were on the rise.

New Home Sales

New home sales took a plunge in March, with completed transactions of new, single-family homes dropping 1.5 percent to an annual rate of 511,000, according to a joint report from the Census Bureau and the Department of Housing and Urban Development. That said, compared annually, March’s new home sales marked a 5.4 percent increase over March 2015’s rate of 485,000.

Looking at price and supply, the median sales price of new homes sold in March was $288,000, and the average sales price was $356,200. The estimated number of new homes for sale at the end of March totaled 246,000, which represented a 5.8-month supply of homes at March’s sales rate.

The big hope was that seasonal sales increases will help turn around new home sales’ recent disappointments.

“While new home sales have lost some luster in recent months, we believe they will re-accelerate as we head into [the] spring season,” noted Gregory Daco, head of U.S. macroeconomics at Oxford Economics, in a public statement.

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Initial Jobless Claims

Lay-offs ticked up, but remained at lows not seen since the 1970s. First-time claims for unemployment benefits filed by the newly unemployed during the week ending April 23 hit 257,000, a gain of 9,000 claims over the preceding week’s level of 248,000, the Employment and Training Administration reported. This marked the 60th straight week of initial claims below 300,000 — a level that economists associate with a growing job market — which is the longest streak at that level since 1973.

The four-week moving average — which is regarded as a more reliable measure of job losses — dropped to 256,000, a decline of 4,750 claims from the previous week’s average of 260,750 claims.

“We’re seeing things in the labor market hold up well,” Wells Fargo Securities LLC Economist Sarah House told Bloomberg. “Businesses are feeling pretty comfortable with where the economy is going, so they don’t feel like they have to make those cuts.”

Homes under $350,000

Incomes and Spending

Personal incomes saw welcome news in March: a 0.4 percent increase to $57.4 billion for the month, with disposable personal income (DPI; income after taxes) also growing 0.4 percent to $50.4 billion, according to last week’s report from the Bureau of Economic Analysis.

Personal consumption expenditures (PCE) grew 0.1 percent to hit $12.8 billion. Personal outlays — which combine PCE, personal interest payments, and personal current transfer payments — grew $11.2 billion in March.

Wages and salaries rose to $29.2 billion in March, with private wages and salaries growing $26.3 billion. Supplements to wages and salaries grew by $5.4 billion in March.

Personal saving — which is DPI less personal outlays — grew to $735.5 billion in March, with the personal saving rate — which describes personal saving as a percentage of DPI — increased to 5.4 percent. This week we can expect:

  • Monday — Construction spending for March from the Census Bureau.
  • Tuesday — Car and truck sales for April from the auto makers.
  • Wednesday — First quarter productivity from the Bureau of Labor Statistics; March factory orders from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — March consumer credit from the Federal Reserve; April payrolls, unemployment, average workweek and hourly earnings from the Bureau of Labor Statistics.

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Hey Mom & Dad….

Military Service Academy Nighservicepatcht

Want to know more about attending our nation’s service academies?

Interested junior high and high school students, parents, and school staff are invited to learn about what the service academies (United States Naval Academy, Air Force Academy, United States Military Academy – Westpoint, and Merchant Marine Academy) have to offer.

On Friday, April 22, representatives from Susan Davis’ office will join Congressman Vargas’ office for a Service Academy Night from 5:00PM – 8:00PM at the San Diego Community College District – Cesar E. Chavez Campus 1901 Main Street, San Diego, CA 92113.

Service academy representatives, ROTC representatives and service academy graduates will be on hand to help students learn about the application, nomination and appointment process.

When:
Friday, April 22, 5:00PM – 8:00PM

Where: San Diego Community College District – Cesar E. Chavez Campus
1901 Main Street, San Diego, CA 92113

No RSVP needed – this is an open event.  For questions, please call my office at (619) 280-5353.

Warm Regards,


Susan A. Davis
Member of Congress

Great News for Charter Schools!

From City Councilman Scott Sherman:

featurecd7_2Recently, the City Council approved my measure to reform the City of San Diego’s Conditional Use Permit (CUP) to ease permitting requirements on San Diego public charter schools.

Public charter schools serve over 21,000 students in 51 schools within the City of San Diego. Public charter schools have become an important educational option for thousands of San Diego parents. Unfortunately, the City’s burdensome CUP is enormously complex, time consuming, and expensive.

My plan achieved the following:

  • Revised municipal codes to reduce the permitting requirements to help charter schools obtain facilities
  • K-12 schools with less than 300 students will be permitted in residential multi-family, commercial regional, commercial office, and commercial community permitting zones
  • These revisions allow more money to go directly to education instead of navigating through the permitting process

We began working with public charter schools and affiliate organizations after being contacted by four charter schools in my district having trouble navigating the burdensome permitting process.

Thousands of San Diego working families depend on charter schools throughout San Diego to educate their children.

I applaud the City Council for approving this important measure. It will now be easier for charter schools to obtain quality facilities and allow for more funding to be directed to students instead of for consultants to navigate the complex bureaucratic process.

As always, if you see a problem in the community that needs to be fixed, please contact my office at 619-236-6677 or email ScottSherman@SanDiego.Gov and we will look into the issue right away.

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Flood Maps Revised for Portions of San Diego Co. Effective April 5th

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The Federal Emergency Management Agency (FEMA) has issued revised Flood Insurance Rate Maps (FIRMs) for portions of San Diego County, primarily in the vicinity of Escondido, San Diego and Imperial Beach. The maps will become effective on Tuesday, April 5, 2016. These maps show areas that are considered to be in a floodplain, and therefore may require homeowners to obtain flood insurance. Disclosure of a Special Flood Hazard Area (Zone “A” or “V”) that affects the property is a statutory requirement in real estate transactions under California Civil Code 1103.

FEMA last updated flood maps in most of the county in May 2012. On the maps that will be effective on April 5th, approximately 5 parcels have been added to the Special Flood Hazard Area (“100-yr flood zone”) and about 146 parcels have been removed from this high-risk zone.

Prospective home buyers may wish to check with their insurance agent to see if the property’s flood zone, and insurance requirements, will be affected by the map changes.

For more information about…

– the flood map changes and how they may affect your clients
– insurance requirements which these changes may trigger
– opportunities that may benefit your clients with lowered flood insurance costs
– disclosure compliance
– how to view the new FEMA maps online

…give us a call and we will make sure that you receive the information you need regarding the changes.

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The reverse mortgage has won some new respect.

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A decade ago, most financial advisers would roll their eyes at the mention of reverse mortgages, loans that give homeowners an advance on their home equity and allow them to delay repayment until the home is sold. Such products, these advisers used to say, weren’t for their clients, but rather for those who didn’t prepare financially for retirement.

New safeguards in recent years, however, have led many advisers and researchers to change their minds about reverse mortgages. Indeed, many now are exploring when and how to use them in financial plans. One important change, the Reverse Mortgage Stabilization Act of 2013, prevents homeowners in most cases from taking all their equity at once—roughly 40% of the total amount that can be borrowed is unavailable until a year after the initial loan. Other recently enacted regulations require homeowners to demonstrate they are able and willing to pay their property taxes and home insurance. And there are new protections for the non-borrowing spouse.

Recent policy changes “should make the product safer for seniors in the future,” says Stephanie Moulton, an associate professor at Ohio State University and co-author of a 2015 paper on reverse mortgages published in the Journal of Urban Economics. Prof. Moulton estimates that such changes as limiting how much equity borrowers can extract upfront could cut the default rate on reverse mortgages in half. (In 2014, nearly 12% of reverse-mortgage borrowers in the federally insured Home Equity Conversion Mortgage program were in default on their property taxes or homeowners insurance.)

“Over time, these changes may encourage larger banks to re-enter the market, further increasing the credibility of the product and potentially lowering costs,” Prof. Moulton says.

Of course, there are still risks, including spending the proceeds too quickly and suffering losses if the proceeds are invested, as pointed out in a 2015 paper written by Wade Pfau, a professor at the American College of Financial Services in Bryn Mawr, Pa., that favored the use of reverse mortgages in a retirement-income plan under the right circumstances.

While acknowledging the risks, Prof. Moulton says that “one of the advantages of the federally insured reverse mortgage, the HECM, is that the government assumes some of the risk for the borrower.” For example, she notes that HECM borrowers can never end up on the hook for negative equity. If the balance on the reverse mortgage ever grows to exceed the value of the home, the federal insurance covers the difference.

Here’s a look at some of the reverse-mortgage strategies financial planners suggest:

Foreclosure & Bank Owned homes in Chula Vista, CA

Taking a lump sum

Borrowing enough of the equity in a house in a lump sum to pay off an existing mortgage is one of the most frequent uses of a reverse mortgage, says Prof. Moulton. More than 60% of reverse-mortgage borrowers have used the proceeds for this purpose, according to her research. “This actually may be a pretty smart strategy,” she says.

Prof. Moulton cites a recent report by Harvard University’s Joint Center for Housing Studies that found that nearly 40% of seniors age 65 and older carry a mortgage today, a rate that has more than doubled since 1992. “Using a reverse mortgage to pay off a forward mortgage frees up monthly cash flow to a household,” she says. “Essentially it has the same effect on a household budget as receiving a monthly annuity payment.” But lump-sum borrowing can go wrong. Harold Evensky, chairman of Evensky & Katz/Foldes Financial, a wealth-management firm based in Lubbock, Texas, generally advises against using a lump sum as leverage to increase debt—as a down payment on a second home or vacation home, for instance. “There may be circumstances that justify the strategy, but it’s not something that should be considered without carefully considering the potential risk,” he says. “The risk is overleveraging,” he says—taking on more debt than you can afford to pay off.

And even if that isn’t the case—if the homeowner spends the borrowed money without incurring additional debt, say on a vacation or a car—spending the equity in a home this way deprives the homeowner of a valuable financial cushion, he says.

Foreclosure & Bank Owned homes in San Diego, CA

Opening a line of credit

Increasingly, advisers are suggesting that homeowners establish a line of credit through the HECM program whether they need the money immediately or not, because it can be used in several ways, as the need arises, to protect savings or even increase income in retirement.

A line of credit makes more sense than borrowing a lump sum and keeping it in reserve, says John Salter, an associate professor at Texas Tech University who has co-written papers with Mr. Evensky on reverse mortgages. That’s because, due to the intricacies of reverse-mortgage terms, the unused portion of a line of credit grows over the years, giving the homeowner access to more cash.

Shelley Giordano, chairwoman of the Funding Longevity Task Force, a Washington, D.C.-based industry group that promotes the use of home equity as a tool for retirement income, suggests setting up a reverse-mortgage line of credit as a way of protecting retirement funds from fluctuations in the financial markets.

Here’s the idea: In a bear market, homeowners can borrow funds as needed through the line of credit rather than withdrawing money from their investment portfolios. Withdrawals from a portfolio in down markets lock in losses and leave less money to grow when markets rebound. By borrowing instead, homeowners give the portfolio a better chance to recoup its losses when markets turn around.

Once the portfolio recovers, it can be used to pay off the line of credit, which is then fully available the next time cash is needed in a bear market. Ms. Giordano notes an HECM line of credit “cannot be canceled, frozen or reduced regardless of what the home value does in the future.”

An HECM line of credit also can be used as a source of income for those who want to delay applying for Social Security benefits and so increase their monthly payout when they do start taking benefits, Ms. Giordano says. After you apply for Social Security, you can stop taking money from the line of credit and, if you want, pay the loan back.

Because income from a reverse mortgage isn’t taxed, experts say an HECM line of credit can also be used—in place of taxable withdrawals from retirement accounts—to avoid tax-bracket creep, as well as the higher Medicare Part B and Part D premiums that can result from higher incomes. Ms. Giordano also suggests using a reverse-mortgage line of credit to pay taxes due on Roth IRA conversions. In the conversion process, distributions from IRAs are taxed as ordinary income, and experts often recommend paying those taxes with funds outside the IRA, because using money from the IRA for that purpose generates even more taxes.

Mr. Evensky says the usefulness of reverse mortgages belies the negative impression some people still have of them.

“I believe most criticisms relate to a myopic view of the product that has not been reviewed for decades,” he says. “Unquestionably there can be misuses of the product. But the problem is the use, not the product.”

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Article provided by Wall Street Journal

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