Monthly Archives: February 2014

Rent? or Buy! – The cost is going up

Buy vs Rent“Yet another indication of what is coming in 2014.  The expert all agree that it will get more expensive to buy a home the further we go into the year.  Read this article and then click on the link at the end to use the calculators and see what makes sense for you.”

DC Metro Realty Team – Denise Buck & Ed Johnson

Whether you continue to rent or decide to buy a home, according to recent Zillow 2014 housing projections, the cost is going up. Zillow projects home prices to increase nationally by 3%, mortgages to rise to 5% interest rate by the end of the year and rents to go up by 2.5% on average.

If it will cost a person more whether they rent or buy, the conclusion can be made that one way or the other, they will pay for the house they occupy. The question will be whether they buy it for themselves or their landlord? Will they benefit from the equity build-up and the appreciation?

The following analysis looks at a $200,000 home that can be purchased with a 30 year FHA mortgage at 4.3%. The assumption uses 3% appreciation and tenant currently paying $1,750 a month in rent.

The house payment, principal, interest, taxes and insurance would be about $1,609 a month. However, once you consider the benefits of the principal reduction each month, the appreciation and the tax savings and the increased cost of maintenance, the net cost of housing is closer to $630 per month.

Even if you ignored the tax savings, the net cost of housing would only be $919.06 per month. The tenant would pay considerably more to rent than to own the home. Over time, the decision to buy a home could result in a considerable financial asset that the tenant will not benefit from.

To estimate your cost of housing, use the Rent vs. Own.

5 Things You Should Know About VA Loans

“Working in the DC Metro area we deal with VA Loans on a regular basis.  They are truly a wonderful tool to use when buying a home.  Even though everyone who is eligible to use one knows who they are, there are many aspects about VA Loans that people just aren’t aware of.  This article helps educate home buyers on several special aspects of the program.”

DC Metro Realty Team – Denise Buck & Ed Johnson 

VA loans are the most misunderstood mortgage program in America. Industry professionals and consumers often receive incorrect data when they inquire about them. In fact, misconceptions about the government guaranteed home loan program are so prevalent that a recent VA survey found that approximately half of all military veterans do not understand it.

With this in mind, we would like to debunk the most common myths about VA Loans.

Myth 1: The VA loan benefit has a “one time” use.

Fact: Veterans and active duty military can use the VA loan many times. There is a limit to the borrower’s entitlement. The entitlement is the amount of loan the VA will guarantee. If the borrower exceeds their entitlement, they may have to make a down payment. Never the less, there are no limitations on how many times a Veteran or Active Duty Service Member can get a VA loan.

Myth 2: VA home loan benefits expire if they are not used.

Fact: For eligible participants, VA mortgage benefits never expire. This myth stems from confusion over the veteran benefit for education. Typically, the Montgomery GI Bill benefits expire 10 years after discharge.

Myth 3: A borrower can only have one VA loan at a time.

Fact: You can have two (or more) VA loans out at the same time as long as you have not exceeded your maximum entitlement and eligibility. In order to have more than one VA loan, the borrower must be able to afford both payments and sufficient entitlement is required. If the borrower exceeds their entitlement, they may be required to make a down payment.

Myth 4: If you have a VA loan, you cannot lease the home.

Fact: By law, homeowners with VA loans may rent out their home. If the home is located in a non-rental subdivision, the VA will not guarantee the loan. If the home is located in a subdivision (such as a co-op) where the other owners can deny or approve a tenant, the VA will not approve the financing. When an individual applies for a VA loan, they certify that they intend on making the home their primary residence. Borrowers cannot use their VA benefits to buy property for rental purposes except if they are using their benefits to buy a duplex, triplex or fourplex. Under these circumstances, the borrower must certify that they will occupy one of the units.

Myth 5: If a borrower has a short sale or foreclosure on a VA loan, they cannot have another VA loan.

Fact: If a borrower has a claim on their entitlement, they will still be able to get another VA loan, but the maximum amount they would otherwise qualify for may be less. For example, Mr. Smith had a home with a $100,000 VA loan that foreclosed in 2012. If Mr. Smith buys a home in a low cost area, he will have enough remaining eligibility for a $317,000 purchase with $0 money down. If he did not have the foreclosure, he would have been able to obtain another VA loan up to $417,000 with no money down payment.

Veterans and Active duty military deserve affordable home ownership. In recent years, the VA loan made up roughly 13% of all home purchase financing. This program remains underused largely because of misinformation. By separating facts from myth, more of America’s military would be able to realize their own American Dream.

This article originally posted by Keeping Current Matters. Read more articles like this at www.KCMblog.com.

Find a Better Financial Return

“Understanding your investment options is critical to your future financial success.  It pays to know what the multiple options are as well as the Pros and Cons of each.”

DC Metro Realty Team – Denise Buck & Ed Johnson

A certificate of deposit will generate a cash flow based on the interest rate that it pays which is the only way it generates a return for the investor.

An investment in a stock that doesn’t pay dividends, would need to be worth more than you paid for it to earn a profit. On the other hand, a stock that paid dividends could make the investor a profit even if it sold for the same price that he paid for it.

Investors can profit four different ways with an investment in rental real estate.

1. Cash flows that result from having a surplus after collecting the rent and paying the expenses.

2. Equity build-up results from a portion of each monthly payment reducing the unpaid balance.

3. Tax benefits can result from the depreciation allowed on the property and the preferential long-term capital gains tax rate.

4. Appreciation benefits the investor when the value of the property increases.

The most conservative investors in real estate make decisions to purchase a rental property based on its ability to generate a cash flow and reduce the mortgage through normal amortization. If the property can offer an acceptable rate of return compared to other available investments, the tax benefits and possible appreciation become an added bonus.

With increased rents and low mortgage rates for investors, rental property can offer significantly higher returns than many of the available alternatives. Contact me for more information- Denise.Buck@DCMetroRealtyTeam.com; you may be amazed about what is available in the market.