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HOA: What’s a Homeowners’ Association & How Does it Work?
Does your dream home come with a Homeowners’ Association (HOA)? Are you curious about what that would mean for you as the homeowner? Let’s explore what an HOA does. We will also examine some of the pros and cons of living under their governance.
What is an HOA?
An HOA is an organization that governs a community of homes. The type of home can vary. An HOA may be organized to oversee condos, townhomes, or a neighborhood of single-family homes. According to the Foundation for Community Association Research, 30% of the population in the United States now resides in a community association.
When you live in an HOA, you must comply with their Covenants, Conditions, & Restrictions. Also known as CC&Rs, they outline what can and cannot be done to your home and what is the responsibility of the HOA. The CC&Rs commonly include regulations such as parking rules, upkeep expectations, and processes for making changes to the outside of your home or settling neighbor disputes.
In addition, if a homeowner does not comply with the rules or governances of the HOA, they could be subject to fines until they comply with the organization’s rules.
What are the fees associated with an HOA?
Fees vary widely by HOA. Some charge less than $100 a month, while others charge about $1,000 a month. The HOA will collect the dues monthly or annually. The dues are used to run the association.
In addition, an HOA may collect fines from homeowners not following the CC&Rs. Or, they may impose a special assessment as a large one-time fee to cover a project in the association that falls beyond the scope of the budget.
What benefits will they provide?
Monthly dues can vary because their services vary. In some cases, an HOA will cover all gardening, exterior work and other community amenities (such as a pool or gym). Some even pay for utilities.
In other cases, the HOA may act more as a guide to oversee compliance with home upkeep and smaller community spaces. They may be in place to help the neighborhood maintain property values by ensuring the neighborhood’s aesthetic remains favorable.
What if I break a rule?
Breaking a rule could lead to a warning. If it is not addressed, then it may become a fine. It is also important to consider the annual or monthly assessments as part of your mortgage payment, much like your insurance and property taxes. Failure to pay the annual assessments could, in the worst-case scenario, lead to a lien on your property. Check out Washington’s detailed Homeowners’ Association laws.
Where can I learn more about an HOA?
When you’re thinking about purchasing a home that’s part of a Homeowners’ Association, do your research and speak to potential neighbors. You should be completely aware of what they offer as well as their rules, fees, and regulations. HOA documents such as the CC&Rs should be disclosed in your home purchase paperwork. Read all the homeowner expectations and the benefits provided by the HOA carefully. This will help you better understand what your new community will entail.
HOAs have pros and cons. It’s important to understand the expectations and regulations in advance. For some, a higher monthly fee may be worth not having to deal with exterior maintenance and landscaping. For others, the restrictions placed on property improvements may not fit their lifestyle or desires as a homeowner. It is a personal decision, and every HOA is different.
Homeownership Myths Debunked
If the dream of homeownership often feels unattainable, consider analyzing what you hear and assumptions people often make. Cherie Kesti, Penrith Branch Manager and Mortgage Consultant, has heard many myths and misconceptions. She has over 20 years of experience in the home financing industry. So, we asked if she would provide the facts, and she graciously agreed. Here are 10 homeownership myths debunked.
Cherie Kesti, Branch Manager/Mortgage Consultant, NMLS #754397
Myth #1: I need a 20% down payment
If you have a 20% down payment, great. However, you may qualify with as little as 3% down if you’re a first-time home buyer. Even 5% down is a possibility if you’re not a first-time home buyer purchasing your primary home. Also, there are -0- down payment loans such as VA and USDA as qualifications allow.
Myth #2: I’ll wait to buy with today’s interest rates
Waiting could cost you. First of all, home values will increase over time. Then, if interest rates do fall again, there will be much more competition to purchase homes. This could make it more difficult to get the home you want. Look at it this way: marry the house and date the rate. You can always refinance the mortgage rate if they drop again. Conversely, you may not be able to purchase at the same level in a year or two or three from now.
Myth #3: I can’t qualify for an investment home
Did you know you can purchase a 2 – 4 family home, live in one unit, and then collect rent on the units that you don’t occupy as your primary home? Plus, you could do this with as little as 3.5% down payment!
Myth #4: I need a 720-credit score
There are mortgage loan programs available for buyers with lower credit scores.
Myth #5: I’ll never have enough for a down payment
There are down payment assistance programs available to help cover the down payment and some closing costs based on qualifications. In addition, did you know that a monetary gift from a family member is allowed and an acceptable source of down payment and closing costs? Did you know that you may be able to borrow money from certain retirement accounts to access funds for a down payment on a home?
Myth #6: Renting is cheaper than homeownership
If you move around a lot, yes, renting might be cheaper. However, if you’re putting down roots, homeownership has traditionally proven to be a positive financial investment with appreciation over a period 5 – 9 years. Typically, if you put down the minimum down payment at the time of purchase, it is recommended that you stay in your home long enough for the equity to build. Typically, this means having enough equity to cover your selling costs. Selling costs may amount to about 8% to 9% of your sales price.
Myth #7: Bankruptcy/ foreclosure ruined my chances
If this kind of event happened one to four years ago, you may be able to qualify for a new home loan. Never lose hope! Always call and ask.
Myth #8: Pre-qualification is the same as pre-approval
Pre-qualification usually means that your loan application and credit have been completed successfully online, and that’s all. However, pre-approval goes further. It means your supporting documents have been reviewed & approved by a formal underwriter who has approved your loan terms and conditioned the approval for property-related items such as a purchase agreement, appraisal, title report, and homeowner’s insurance for the new home. It is best to be fully approved before putting yourself under a legal contract to purchase a home. This will prevent unforeseen qualification blunders.
Myth #9: Self-employed= financing is impossible
When approval on a traditional mortgage loan seems impossible for a self-employed borrower, stay positive. There are mortgage loan programs where qualifying on the income received in business bank statements will be the answer to a successful approval.
Myth #10: You need a social security number
With at least one year of employment history, a valid ITIN card, or an IRS letter, financing a home may be possible. It could even be possible with as little as 15% down and credit scores as low as 600.
Homeownership is possible even in today’s housing market with rising prices and interest rates. First and foremost, take the time to speak with a lender to go over different loan options and programs. As Cherie Kesti said, “Never lose hope!”
If you have additional questions, contact Cherie.
Buy Before You Sell with a Bridge Loan
If you’re thinking of selling your current home in order to buy a new one, you may be feeling overwhelmed. Selling a home poses numerous challenges, and buying a home in a desirable market such as ours can be a rollercoaster. A bridge loan can be a useful solution. Let’s explore this further.
Bridge Loan Basics
A bridge loan is a short-term financial solution that enables homebuyers to access a portion of the equity in their current property. For many homeowners, this involves using the equity from their existing home as a down payment for a new one, thereby enhancing their immediate cash flow. Bridge loans, similar to home equity loans, are secured with their current home as collateral.
Due to their higher risk, certain criteria must be met to qualify for a bridge loan. Lenders typically seek a low debt-to-income ratio, a positive credit history, and substantial equity in your current residence. Consequently, some homeowners may find it challenging to meet the requirements for a bridge loan.
Benefits of the Windermere Bridge Loan
We offer our clients an exclusive bridge loan program. The Windermere Bridge Loan uses the equity from your current home so you can make a non-contingent offer on a new one. When determining the bridge loan, Windermere looks at the amount you owe on your home in addition to the bridge loan. When combined, these two loans cannot total more than 75% of the value of your current home.
The Windermere Bridge Loan increases your competitiveness as a buyer and alleviates the pressure of selling your current home before purchasing a new one. Waiting for your current home to sell could mean losing your ideal home to someone else. Sellers find non-contingent offers more appealing. So, the Windermere Bridge Loan ensures a smoother closing process. We specialize in streamlining the home buying and selling process, and our highly rated local experts are here to assist.
Many of our agents have used this program and have had great success. The approval process is straightforward and only takes a few days. Additionally, no payments are due on the loan before your home closes. The principal and interest payments are due either when your current home sells or within six months after receiving the disbursement, whichever occurs first.
Additional Information
Please review the new real estate law changes so that you are aware of how they impact homebuyers and sellers. We’re happy to answer any questions you may have.
If you’re wondering about buying a house out of state, we’ve answered some frequently asked questions on that topic. And, check out these 8 tips when preparing to sell.
Turnkey vs. Fixer-Upper Home: Know Before You Invest
If you’re contemplating purchasing your first home or an investment property, finding a home that meets your needs can be challenging. You may be debating between buying a turnkey vs. a fixer-upper home. The biggest difference between these two is the condition of the property. Determining the right fit depends on what you are able to take on as a homeowner and what you want to achieve if you’re going to rent the home and become a landlord.
What does turnkey property mean?
Turnkey properties are move-in ready houses. This means the property doesn’t require any repairs and is ready to rent immediately. Sometimes these homes are newly constructed and other times, the homes are recently renovated. Often, renovated homes are owned and refurbished by companies that specialize in these types of transactions. The company may offer property management services as well. This is a great option if you prefer not to be involved in the day-to-day requirements of managing an investment property and being a landlord.
What does fixer-upper mean?
Fixer-uppers are the opposite of turnkey properties. Purchasing a fixer-upper means exactly what the term implies, a property that requires fixing before it’s move-in ready. If you invest financially in a fixer-upper, you must also be prepared to invest your time and additional money in making repairs and remodeling. Often, these properties require extensive renovations before renting out. While fixer-uppers have great potential, it’s up to you to make this potential a reality to ensure your investment transforms into profit.
What to know when buying a turnkey
Turnkey Positives
If you are a first-time homebuyer, a turnkey home might be the best option. This way, you don’t have to worry about major repairs in addition to going through a home purchase for the first time.
Since turnkey houses are move-in ready, you could start renting out this property immediately. Without needing to do renovations, the only necessary step is finding a renter. And typically, in today’s tight housing market, identifying a renter is relatively easy and quick compared to big home repair projects. Additionally, if you’re not interested in dealing with the work required to find quality tenants, a property management company can help. Our colleagues at Windermere Property Management are experts in marketing properties, screening potential tenants, collecting rent, and handling maintenance issues. This is a great option to generate passive income without dealing with day-to-day operational tasks.
Turnkey Negatives
While buying a turnkey home may sound like a no-brainer, the main downside is higher costs. A pristine property comes at a premium price. Top renovations such as new appliances, tiling, flooring, painting, and cabinetry all cost more, which shows in the listing price. If you decide to purchase a turnkey home, take time to figure out how to make it work financially. Research strategies to save money for a down payment while still covering your other expenses.
Turnkey properties aren’t always what they seem. According to the National Association of Realtors, “turnkey should mean that everything in the house is new, rehabbed, or otherwise in excellent condition with no visible signs of wear”. However, it can extend to “a house that is generally clean but needs substantial updating.” So, be careful when viewing homes labeled as “turnkey”, especially flipped homes. A great buyer’s agent will know what to look for and can find out what has been repaired and updated. Then you can make sure everything is thoroughly inspected for quality and safety.
What to know when buying a fixer-upper
Fixer-Upper Positives
Many buyers are looking for turnkey homes, so there is a much smaller pool of people searching for fixer-uppers. Most buyers do not want to take on a major remodeling project and invest in repairs, especially if they’re taking on a second mortgage with an investment property. The combination of less competition and extensive repairs can mean better prices. Just make sure to do your research and talk to your real estate agent before making an offer. Together, you can come up with a strategy for making the best offer. By securing a deal, your investment will increase as the home’s value increases with repairs, renovations, and improvements. Your efforts will pay off down the road with a higher return on investment potential.
Fixer-Upper Negatives
The major negative of purchasing a fixer-upper is the cost of making necessary repairs. While you won’t have to worry about the fix-it extremes depicted in the classic movie “The Money Pit”, it can still be a costly endeavor. The real cost of a fixer-upper varies depending on the location, home size, and types of repairs. If you happen to be pretty handy, you might be able to save money through DIY remodeling projects. If you’re not, hire professionals to prevent needing to hire contractors to fix your mistakes.
Despite your best efforts to budget repairs, it’s impossible to account for unforeseen incidents. To minimize unexpected repairs, ensure a thorough home inspection is completed on the property before buying. Regardless, projects may run long and over budget, supply costs might rise, and the market might change by the time the house is ready to rent. Make sure you talk to your homeowner’s insurance company in advance to understand what’s covered in these types of scenarios. You may be able to qualify for a home improvement loan to help finance the renovations, but this is still money that must be paid back. Buying a fixer-upper is a big decision that requires a lot of thought and planning.
A local real estate agent can help
One of our highly-rated Windermere Silverdale agents can help determine what’s best for you. They are experts in our local real estate market and can identify properties to view and discuss. You can also check out some of their helpful home-buying tips.
If you’re thinking of buying a home in or near Kitsap County and you’re in the military, many of our agents work with military families. Some of our agents are veterans, military spouses, and/or relocation specialists. Explore our military resources to learn more.
Whether you purchase a turnkey home or a fixer-upper, we wish you the very best in your home-buying journey.
Buying and Selling Simultaneously: Your Questions Answered
Going through the process of selling a home is often an emotional, time-consuming endeavor. Buying a home is a complex process as well. Doing both at the same time can be challenging. If you’re contemplating doing both, it’s best to know what your options are to help ensure the process goes smoothly. Buying and selling simultaneously requires staying on top of many different tasks. It’s always helpful to work with an experienced, local real estate agent who can project manage, utilize their network of trusted local vendors, and serve as your advocate. To help you get started, we have answered some common questions.
Should I buy or sell first?
The answer to this question really depends on what you think will make your life easier. Starting the selling process first is most beneficial from a financial perspective. Once you sell your home, you’ll have more cash on hand. This improves your overall financial health by paying off your mortgage and increasing your available down payment. But if you do sell first, you will need a place to stay until you can find your next home to purchase. Or, you may be able to negotiate a rent-back agreement with the buyer. This allows you to temporarily rent the house. While renting, you have more time to pack and find a new home.
If you start with the buying process, then renting back your home isn’t necessary. You’ll be able to pack up all your belongings and move into the new place. But this transitional simplicity can lead to more financial hurdles. If you haven’t sold your house, then you may be juggling two mortgages. This can impact your loan terms by carrying more debt. Plus, gathering enough for a down payment could be challenging. If your down payment is less than twenty percent, obtaining private mortgage insurance (PMI) may be necessary. Lastly, buying first works best if your current house sells quickly. If, for some reason, it doesn’t, a bridge loan might be an option. Bridge loans can cover the down payment on a new house and are repaid once your existing home sells.
Should I accept a contingent offer?
Deciding whether to accept a contingent offer really comes down to timing. There’s no guarantee that the buyer’s home will sell fast. This is especially true if they currently live in an out-of-state housing market where you may be less familiar with what’s hot and what’s not. Consequently, if you’re hoping to sell your home quickly, then it’s best to include a timeline in the contingency agreement. This ensures everyone is on the same page and gives you an out if their selling process drags on.
Accepting a contingent offer also depends on the level of interest in your home. If your house isn’t attracting many potential buyers, a contingent offer might be a good option. That said, there’s always the possibility that you accept a contingent offer and then receive another offer. Thankfully, it’s easy to prepare for this scenario. Simply include a “bump” clause. This allows you, the seller, to accept the offer, but continue showing your house to prospective buyers. If you receive a tantalizing offer without contingencies, you can “bump” the first offer. Typically, you include language that gives the first buyer an opportunity to respond and waive the contingency and/or offer more, depending on the scenario. Always make sure you include a time frame in the “bump” clause to require the first buyer to respond. If you don’t receive a response, you can legally back out of the contract and pursue the new offer. Regardless of which direction you go, it’s best to come up with a clear and transparent plan of action.
Should I buy a home with a contingent offer?
Purchasing a home with a contingent offer really depends on the local housing market. If the neighborhood you want to buy in is highly desirable, a contingent offer most likely won’t be enough to secure the house you want. As a result, sellers may be reluctant to accept or will require a “bump” clause, as mentioned above. In this situation, to have the best chance, you may have to make an offer outright.
If you are house shopping in a more relaxed market, a home sale contingent offer has benefits. This type of offer allows you to transition easily between houses. It’s a great way to avoid renting temporarily or placing belongings in storage. Once your home sells, another awaits your arrival.
Should I stage my home?
Yes. While staging a home might seem daunting, it’s definitely worth it. Staged homes typically sell faster and for more money. This is always a plus, especially if you are buying and selling simultaneously. Also, you have to consider how people look at homes today. Most buyers look at them online first. A staged home draws people in with enticing photos. Staging your home is the best way to attract buyers and help them take the next step. For more information about the selling process, check out our tips when preparing to sell.
Is now a good time to buy and sell?
Based on what we’re seeing in the Kitsap County real estate market, we think the answer is yes. The average sale price in the second quarter was $694K. While the number of sales is down overall, sellers are still receiving 100% of their asking price. We’re moving toward a more balanced market so buyers don’t tend to be in such competitive situations compared to the height of the pandemic when there were many multiple offer situations.
The best way to achieve your real estate goals is by working with a local real estate agent who can negotiate effectively on your behalf. Our Brokers are highly rated and very knowledgeable. Check out these home-buying tips and insights from a few of them. Contact us, and we’ll help you get started with the process of buying and selling simultaneously.
5 Signs You’re Ready to Buy A Home
Becoming a homeowner is a big step, but with careful planning, you can prepare yourself to be in a good position to buy your first home. To the uninitiated, buying a home can seem like a mysterious and complicated process, when really, it’s about knowing what needs to be in place to move forward. Here are five signs that you’re ready to buy a home.
You’re Prepared For Homeowner Responsibilities
Owning a home is much more than just paying a mortgage. Before you dive in, do a self check-in and make sure you’re ready to take on all the responsibilities of being a homeowner. This includes keeping up the yard, maintaining the property, making repairs, purchasing new appliances when needed, and contacting contractors. If a home is in need of attention, make sure you are ready to tackle remodeling projects and deal with any associated inconveniences. Lastly, check your finances and verify that you’ll be able to cover expenses associated with owning a home. Everything from calling a plumber to possibly paying a gardener – it’s all part of the fun of maintaining your new domain.
You’ve Done Your Homework
Before buying a home, do your research. There’s tons of great information available from credible online sources. Windermere agents provide many tips for first-time home buyers and specific tips for millennials as well. In addition, there are many credits and incentives for first-time home buyers. Read up and see if you qualify. Even more importantly, research your local market to get a sense of which homes are in your budget and if they meet your needs and at least some of your wants. This information is crucial in helping decide whether you are ready to buy a home in the neighborhood of your choice.
You Have a Good Credit Score
You don’t need a perfect credit score to qualify for a mortgage. But a good credit score often means more loan options and lower interest rates from lenders. Generally, it’s necessary to have a credit score of at least 620 to qualify for a conventional mortgage. It’s even better to have a credit score in the high 700s to ensure a low-interest rate. There are several loan options available with varying minimum credit scores, including VA loans. If you’re in the military and you want to buy a home, our agents love working with military families. They’re experienced and familiar with VA loans, and the associated credit score requirements. And, some of our real estate agents are veterans themselves.
You Have a Plan for Paying Off Debt
Before taking on the additional responsibility of having a mortgage, assess your debt. While lenders aren’t expecting first-time homebuyers to have zero debt, they are looking for you to have a payoff plan. Showing lenders that you are paying off debt will strengthen your buying credibility. It will also play a role when lenders assess your overall financial health during the pre-approval process.
You are Prepared for All Home Buying Costs
First-time homebuyers often think of purchasing a home in terms of saving enough for a down payment and mortgage. Having a 20-percent down payment means you won’t need to purchase private mortgage insurance (PMI) and leads to the best interest rates. But there are many other costs when buying a home including closing costs, moving expenses, plus appraisal and inspection fees. Additionally, property taxes may sometimes need to be paid as part of the mortgage depending on the time of year. After you move in, you’ll also need homeowners insurance. If you’re prepared to cover all these costs, then it’s a sign you are ready to buy a home.
Once the above 5 signs begin to align, connect with an experienced, local agent to learn more about buying your first home. They will know the local market very well. And, they’ll have excellent connections to local lenders, inspectors, repair services, and more – all of which will give you an advantage when you’re ready to find and purchase your first home.
How to Get the Best Mortgage Rate
If you are thinking about purchasing a home, it’s essential to stay ahead of the game when it comes to securing the best mortgage rate. Understanding mortgages and how to secure low-interest rates earlier rather than later is highly beneficial. Below you’ll find the essential information you’ll need to get started.
What is a Mortgage Rate?
A mortgage loan is what borrowers use to purchase a home or a piece of real estate. Homeowners pay the loan back in a series of monthly payments. However, the property serves as collateral until the loan is paid off.
Naturally, a mortgage rate is the interest rate applied to the loan by the lender. Generally, people want to get the lowest rate possible so that they pay the least amount in the long run. Lenders determine your interest rate, and it can either be fixed or it can vary over time. A fixed-rate mortgage remains the same throughout the life of the loan. On the other hand, an adjustable-rate mortgage is set for a period of time and then the interest rate adjusts at a pre-arranged frequency.
What Do Lenders Consider?
There are a variety of factors that lenders will consider when determining a rate for your mortgage. First, they will take your credit score in to account. Your credit score tells the lender how likely you are to make your mortgage payments on time. So, it’s a good idea to start improving your credit score beforehand, if possible.
Your down payment will also be a significant factor. The amount of your down payment is directly related to how much risk a lender has to take on. Therefore, larger down payments usually mean lower rates, while smaller down payments mean higher interest rates.
The type of loan you accept and the size of the loan also factor into your interest rate. Of course, you have different loan options to consider. Besides conventional loans, there are jumbo loans and government-insured loans. Most lenders will have different payment options with different interest rates. Additionally, there are VA loans for those who qualify. Many of our agents have extensive experience working with military families. Some of them are veterans themselves or have family members who have served. It is essential to take time to review each type of mortgage and its terms to figure out what works best for you.
How to Secure the Best Mortgage Rate
Potential and future homebuyers need to have the foresight to set themselves up for success. Saving up for a sizeable down payment and building a good credit score can take years but you’ll be glad you did it in the long run. Additionally, having a steady job history will also prove to lenders that you are reliable since it proves you have a steady income.
When you’re ready to buy, there are other important considerations to make. You may want to consider a shorter loan term. If you take out a 15-year fixed-rate mortgage vs. a 30-year fixed-rate mortgage, the interest rate will typically be lower. While an adjustable-rate mortgage can present challenges down the road for some, in the short term, its introductory rate may be lower than what you could get with a fixed-rate mortgage. However, it does depend on the current market. You also don’t know what the interest rates will be after the introductory period and there’s no guarantee that you’ll be able to refinance or sell right after the introductory period ends. Another important aspect to remember? Competition. Many different mortgage lenders are competing for your business so use that to your advantage by shopping around. Apply with at least three or four different lenders to see which one offers you the best rate.
This process is more complex than it may seem, so if you have any questions our local real estate experts are here to help.
