VA Announces Temporary Policy Update on Real Estate Agent Commissions for Veterans

The Department of Veterans Affairs (VA) has announced a temporary policy update allowing veterans to pay real estate agent commissions when purchasing a home. This change, effective August 10, 2024, aims to prevent VA buyers from being disadvantaged as new real estate rules take effect later this summer.

Key Updates:

  • Effective Date: The policy takes effect on August 10, 2024.
  • Previous Rule: Veterans could not pay buyer-agent commissions; sellers had to cover these costs.
  • New Rule: Veterans can now pay their buyer’s agent directly, provided the fee is reasonable and customary for the market.
  • Seller Option: Sellers can still choose to pay the buyer’s agent commission, which does not count against the VA’s 4% cap on seller concessions.

This change comes in response to a paradigm-shifting lawsuit and resulting settlement by the National Association of Realtors (NAR) in March 2024. The settlement, effective August 17, 2024, could make homebuyers responsible for their Realtor’s commission, potentially up to 3% of the home’s price. This could have posed a significant problem for veteran homebuyers under the old VA rules.

Understanding the New Guidance

The new guidance allows veterans using the VA home loan to pay their real estate agent directly, under certain conditions:

  • Direct Payment: Veterans can now pay their buyer’s agent directly in areas where the seller’s agent can’t list the buyer-agent commission on the MLS.
  • Loan Restrictions: The agent commission cannot be wrapped into the VA loan.
  • Verification: Lenders must verify that veterans have enough cash to cover the agent commission, closing costs, and any down payment.
  • Transparency: The buyer’s agent commission must appear on the Closing Disclosure and the sales contract.
  • Appraisal Process: The sales contract, including the buyer’s commission charges, is part of the appraisal process and loan documentation.
  • Seller Payment: Sellers can still pay the buyer’s agent, but it is not mandatory.

Future Guidance

The VA has labeled this rule change as temporary to address imminent market changes. The Loan Guaranty Program plans to develop permanent guidance about buyer-broker commissions in the coming months as the real estate market stabilizes and new practices emerge.

Given the uncertain impact of the NAR settlement, veterans are encouraged to act quickly while sellers are still paying buyer-agent commissions.

Why You Shouldn’t Delay Refinancing Your Mortgage

In the ever-changing landscape of the real estate market, timing is everything. If you’re a homeowner who secured a mortgage when interest rates were higher, now is the time to act. Refinancing your mortgage can be a game-changer, unlocking significant savings and providing you with financial flexibility. In this blog, we’ll explore the compelling reasons why you should consider refinancing now instead of waiting.

Capitalizing on Dropping Rates

Interest rates fluctuate, and today, we find ourselves in an environment where rates are beginning to drop. This presents a golden opportunity for homeowners to refinance and secure a lower interest rate. By refinancing now, you can take advantage of these better rates and potentially save thousands of dollars over the life of your loan.

Reducing Monthly Payments

One of the most immediate and tangible benefits of refinancing is the potential to reduce your monthly mortgage payments. Lower interest rates translate into lower monthly costs, freeing up your budget for other essential expenses or discretionary spending. Why wait to enjoy more financial breathing room when you can start saving now?

Building Home Equity Faster

Refinancing not only impacts your monthly payments but also accelerates the growth of your home equity. With a lower interest rate, more of your monthly payment goes towards the principal, helping you build equity faster. This increased equity can be a valuable asset for future financial endeavors.

Seizing Financial Opportunities

Whether you have dreams of renovating your home, sending your children to college, or investing in other opportunities, refinancing can provide you with the financial means to turn those dreams into reality. Don’t wait for the perfect moment; take control of your financial future now.

Shortening the Loan Term

Refinancing gives you the chance to reevaluate the terms of your mortgage. If your financial situation allows, consider switching to a shorter loan term. While this might increase your monthly payments, it can significantly reduce the total interest paid over the life of the loan and help you achieve mortgage freedom sooner.

Protecting Against Future Rate Increases

Market conditions are unpredictable, and interest rates can rise unexpectedly. By refinancing now, you lock in a lower rate, providing financial security against potential future increases. This proactive approach shields you from the impact of rising interest rates, ensuring long-term stability for your mortgage payments.

Don’t wait for the perfect moment, as the market is dynamic and can change rapidly. By taking action now, you can enjoy immediate benefits such as lower monthly payments, increased home equity, and the flexibility to pursue your financial goals. Consult with a mortgage professional to explore your options and make the most of this advantageous moment in the real estate market. Refinance now, and embark on a journey to financial empowerment and lasting savings.

Breaking News! New Conforming Loan Limits

It’s no secret home prices have been increasing across the country, and today brings good news to help. Homebuyers seeking conforming loans may now borrow up to $766,550 in most counties and up to $1,149,825 in higher-cost areas!

The size of conforming loans, those backed by Fannie Mae and Freddie Mac, is assessed annually. Based on the home sale data from the past year, this limit is being increased by $40,350 year over year. That’s good news for borrowers who want a wider range of financing options.

The conforming loan limit has increased by almost 40% in a three-year period, in response to the challenging home purchase environment. Click here to see how your county compares to the surrounding region — and, as always, don’t hesitate to reach out to one of our qualified loan officers with any questions!

Mortgage Market Insights: Inflation, GDP, and Rate Expectations

After a dynamic week in the market, we thought it would be helpful to share some key highlights. Let’s dive into the recent events and their impact on inflation, GDP growth, and interest rate expectations.

GDP Surprise

Yesterday, there was a significant selloff following the release of the Q1 GDP report. Gross Domestic Product (GDP) measures the total value of goods and services produced in an economy over a specific period. The initial estimate of Q1 GDP growth was 1.1%. However, it was later revised to an robust 2%. This unexpected increase challenges the prevailing belief of an impending recession and influences expectations for future interest rates.

Inflation Numbers

Inflation remains the central focus for the Federal Reserve, with Core Personal Consumption Expenditures (PCE) being their favored measure. Core PCE inflation, which excludes volatile components like food and energy costs, reported at 3.8% year-over-year, in-line with market expectations. Digging deeper, the monthly Core PCE inflation came in at 0.3%, slightly below the expected 0.4%. The annualized rate was 4.6% compared to the anticipated 4.7%. Although Fed officials will likely emphasize the need to bring down inflation from its elevated level, it’s worth noting that inflation is gradually declining towards the 2% target.

Fed’s July Meeting

The Federal Reserve has indicated that the upcoming July meeting is considered “live,” meaning rate increases are possible based on incoming data. Notably, today’s PCE report is the final one before the July meeting, making it a crucial data point for decision-making. It’s important to remember that the impact of the Fed’s actions takes time to manifest in the economy. The availability of credit from commercial banks remains constrained in the wake of the regional banking crisis.  This is affecting the economy but is not yet displaying in backward-looking economic data. Despite the consistent rhetoric about potential rate hikes, many market participants are of the opinion that the more appropriate course of action is to pause and continue to evaluate the impact of the Fed’s previous actions.

Profit Margin Inflation

Some experts have started discussing profit margin inflation as a driver of overall inflation in the economy. Post-COVID lockdown, demand inflation surged, followed by supply-side inflation triggered by events like the Ukraine invasion, leading to disruptions in supply chains and rising prices. However, one of the primary contributors to current inflation is wider retail profit margins. Fortunately, there are signs that consumers are becoming more price-conscious and are pushing back against inflated prices. As a result, companies may be compelled to reduce their profit margins, potentially easing inflation.

Conclusion

While it’s premature to make definitive projections regarding future interest rates, there are positive aspects to consider amidst the surprises in GDP growth. The dynamics of inflation, profit margins, and consumer behavior will continue to shape rate expectations and the overall economic outlook.

Please note that market conditions are subject to change, and it is advisable to consult with financial experts for personalized advice.

The Federal Reserve Increases Federal Funds Rate – Here’s Why It Matters!

The Federal Reserve’s latest meeting just wrapped up, so what are the key takeaways for you?

This afternoon, the Federal Reserve increased the Federal Funds Rate by .25%. It’s critical to understand that when you might see headlines about the Fed increasing their target rates, it usually doesn’t directly impact the mortgage rate you’re able to obtain. In fact, rates for 30-year conventional mortgages have declined by more than 1% over the last few months according to major market surveys.

The Federal Reserve’s Open Market Committee implements policies that help to speed up or cool down the overall U.S. economy. Because inflation has been reported at levels above the Fed’s stated target, the Fed has been trying to slow down the economy and get inflation back under control. Their primary mechanism to do this is to raise the Fed Funds Rate – the rate that banks charge each other to lend money back and forth. When this rate increases the economy tends to slow down, which helps get inflation back in line.

Believe it or not, today’s announcement of a .25% increase in the Fed Funds Rate is actually the smallest increase the Fed has made in almost a year (since March 2022)! This means that the Fed is starting to see the light at the end of the tunnel in our current economy, and we’re likely approaching the end of the rate-hiking cycle. Lower inflation means we all have more purchasing power, and our paychecks can stretch further month-to-month!

While today’s news is positive, it can still be tricky to navigate our current market. Contact the experts at First Home Mortgage today to stay informed on your homebuying decisions!

New Conforming Loan Limits Are Here!

The results are in, and they could have an impact on your home buying journey. Effective today, homebuyers may now borrow up to $726,200 in most counties and up to $1,089,300 in higher-cost areas!

The limit on conforming loans backed by Fannie Mae and Freddie Mac is assessed annually. In September, First Home Mortgage responded to a challenging market by updating the conforming loan limit to $715,000 in most counties and allowing qualified homebuyers the opportunity to borrow above the limit while still enjoying the efficiencies of a conforming loan. Today’s announcement pushes that limit even higher to $726,200 for most borrowers.

This news follows the 2021 increase to $548,250 and the 2022 update up to $647,000. Taken together, this represents a 32% increase in just two years. Click here to see how your county compares to the surrounding region — and, as always, don’t hesitate to reach out to one of our qualified loan officers with any questions!

Author: James Baublitz, VP of Capital Markets

Three Things to Know about the Fed’s Rate Decision

The Federal Reserve just increased the Fed Funds rate .75%. What does that mean, and how does it impact the mortgage market? Here are three things to know about today’s news:

1. The Federal Reserve Influences Mortgage Rates, They Do Not Set Them

Many have the misconception that the Federal Reserve’s actions have a direct impact on mortgage rates. Many assume that if a mortgage was offered 6% this morning, it’s now 6.75% after this afternoon’s announcement. That isn’t the case, however. The Federal Reserve sets the rates banks charge each other, not the rates lenders offer borrowers. The Fed’s actions influence the overall rate environment; it doesn’t set those rates.

2. The Federal Reserve is Trying to Ease Inflation

The Federal Reserve is heavily-focused on easing inflation in the US economy. They are trying to be aggressive in their actions to stop inflation before it takes hold for the long haul. This is good news for home affordability; lower inflation helps boost borrower buying power.

3. Today’s Rate Decision is a Step in the Right Direction for the Economy

The Federal Reserve has two goals: full employment and price stability. The unemployment rate remains low at below 4%, but increasing inflation is causing problems in the US economy. The Federal Reserve’s focus on reining in inflation and today’s announcement will make a significant impact in helping to stabilize the economy as a whole.

Contact us or one of our qualified Loan Officers to learn more!

Author: James Baublitz, VP Capital Markets

Understanding the Increase in Homeowners Insurance Premiums

Have you noticed an increase in your homeowner’s insurance premiums lately—maybe significantly? If so, you are not alone. There are a number of factors that impact how high or low insurance premiums are, and there are several currently at play which have contributed to a recent rise for many homeowners.

What Drives the Increase in Homeowners Insurance Premiums?

In general, the two primary factors that impact homeowners insurance: insurance rates and inflation. There are numerous things that affect each of these factors themselves, and each of them influence insurance premiums to varying degrees. Overall, when insurance rates and inflation go up, so do homeowners insurance premiums.

How Are Insurance Rates Factored and How Do They Impact Premiums?

Homeowners insurance rates are largely connected to the frequency and severity of severe weather. This, of course, means that rates often vary from state to state as the kind of severe weather experiences from one place to another can differ considerably. The more serious and recurrent storms and other weather-related events are, the more reinsurance—which is insurance for insurance companies—rises, making it more expensive for insurers to offer insurance. These increased costs are passed onto consumers by way of higher premiums.

What Impact Does Inflation Have on Insurance Premiums?

You’re probably well aware of the recent increase in inflation as it has impacted the cost of all sorts of goods and services, but how does inflation affect insurance premiums? Not only is the overall rate of inflation notably higher than average, but the rate of inflation for building labor and material costs has spiked even higher, meaning it is more expensive to rebuild homes. Since repairing and rebuilding homes now costs more, insurance companies have to compensate for those increases by upping premiums.

What Does It All Mean?

Insurance premiums are up nearly across the board due to heightened costs for insurance companies resulting from more severe and frequent weather events and increasing inflation. That said, these factors are not going to rise at the same rate nationwide, so the level at which you experience an increase largely varies on where your home is located. The bottom line is homeowners insurance premiums must go up in order to ensure you are fully protected and covered in the case of a total loss. While it can be frustrating to experience higher insurance rates, it is a small price to pay in the grand scheme of things should something happen to your home; it is better to be safe than sorry.

If you are interested in buying a new home or refinancing your current home, contact one of our experienced Loan Officers today to learn more about your mortgage options.

The Federal Housing Authority Announces Update to Student Loan Policies

Understanding which home loan program is the most beneficial for you when purchasing or refinancing a property is key to making a successful loan choice. Our loan officers are up to date on the best programs and newest guidelines and are here to educate you on your most advantageous options.

If you have current or past student loan payments, the Federal Housing Administration’s (FHA) updated policy could be great news for you! The Federal Housing Administration (FHA) helps buyers with low incomes and low down payments who may not qualify for conventional mortgages.  FHA insures the loans, giving lenders the confidence to provide financing to people who otherwise would not qualify.

Effective now, monthly student loan debt may be excluded from your debt-to-income ratio ( DTI) when the program, creditor, or student loan servicer indicates that the full loan balance has been forgiven, canceled, discharged, or otherwise paid in full.

For outstanding student loans, regardless of payment status, to calculate monthly obligations:

  • Use the payment amount reported on the credit report or the actual documented payment (when payment is above zero), or
  • Use .5 % of the outstanding loan balance, when the monthly payment reported on the credit report is zero.

What does this mean for borrowers with student loans?

This new update allows student loan debt to be calculated at 0.5% of the loan balance if the payment is not reported on the credit report when determining loan eligibility. This may give more purchasing power to some buyers with existing student loan debt.

For more information about these beneficial changes, contact one of our experienced loan officers today!

New Conforming Loan Limits for 2021

LOAN LIMITS FOR FANNIE MAE AND FREDDIE MAC INCREASE TO $548,250 IN 2021, AN INCREASE FROM $510,400 IN 2020.

The Federal Housing Finance Agency has announced the Fannie Mae and Freddie Mac conforming loan limits for mortgages for 2021.

Each year, the baseline conforming loan limit is adjusted accordingly with the change in the average U.S. home price. House prices during the third quarters of 2019 and 2020 have increased by 7.42 percent on average; therefore, the Federal Housing Finance Agency is increasing 2021’s maximum conforming loan limit by the same percentage. This marks the fifth year in a row that there has been a limit increase by the FHFA. The baseline loan limit has increased by $131,250 since 2016.

The limit is different in some places known as high-cost areas. These are areas in which 115 percent of the local median home value is higher than the baseline conforming loan limit. The Housing and Economic Recovery Act establishes the maximum loan limit in those areas while also setting a ceiling on that limit which is 150 percent of the baseline loan limit. The new ceiling loan limit in most high-cost areas for 2021 will be $822,375, which is 150 percent of $548,250.

Here at First Home Mortgage, we continue to provide the highest level of customer service while adhering to social distancing guidelines. Our innovative communication technologies allow us to exceed your expectations while keeping everyone as safe as possible.

If you are considering purchasing or refinancing a home, please contact one of our Loan Officers today!

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