How to Get Approved for a Home Improvement Loan

Whether you're building an addition, completely remodeling or just finishing your basement, a home improvement loan can help add value and comfort to your home. There are a variety of loan options available that we detail later in this article, but before you explore those, there are four steps you should take to ensure that you'll get the money you need:

1. Understand Your Credit History
With any type of loan, a higher credit score will give you better terms for your loan. But if you have a low credit score, that doesn't mean a home improvement loan is out of reach. There are government loans, private lenders and co-signing opportunities that may be available to you.

2. Evaluate Your Equity
Home improvement loans are largely dependent on the homeowner's equity, since this becomes collateral for the loan.

Even if you have a decent amount of equity, you will need to prove that you're capable of paying your debts plus the added debt of the home renovation loan. The final terms of your loan agreement will be determined by your ability to pay back the loan on time.

3. Get an Appraisal
The lender needs to know the overall value of your home before agreeing to certain loan terms. Not every lender will require an appraisal of your home, but it helps to be prepared in case it's requested.

4. Estimate Your Project Cost
Before you apply for a loan, you should establish a baseline of estimates from professional contractors to determine how much your home improvement project could potentially cost. This will give you a good idea of how much you'll need to borrow. Seeking out contractors for estimates will prepare you for what your project could entail. For example, you might be unaware that there's mold in your walls which is something you'll definitely need to take care of - and this will add to the amount you'll need to borrow.

While you're figuring out the cost of your project, be sure to request estimates from several contractors so you can shop around for the best price.

What Are Your Home Improvement Loan Options?
After you've completed the above four steps, you'll be ready to look into your loan options:

Home Equity Line of Credit
With a home equity line of credit, you're able to withdraw money as you need it during a time limit that the lender has specified. Much like a credit card, as you pay some of the balance off, your credit will revolve and you can start to withdraw again.

This line of credit can have fluctuating rates that can be higher than the rate you'd get on a fixed-rate loan, making them more risky. But there is more flexibility with a home equity line of credit than a fixed-rate loan.

Home Construction Loans
When it comes to home construction loans, lenders need to place a lot of trust in the builder, meaning they are usually very cautious about giving out these loans. If things go wrong, the lender could quickly realize they've made a bad investment.

Because of the risk for the lender, there are precise qualifications for this type of loan, including:

• Proof of good credit and financial health
• A comprehensive list of project details (floor plans, materials, etc.)
• An estimated home value from an appraiser
• A large down payment - usually 20-25 percent
• Working with a builder that's approved by the lender

Home Equity Loans
A borrower uses the equity of their home as collateral under a home equity loan. The value of your property will need to be determined by a licensed appraiser, and this will determine the loan amount you are eligible to receive.

Usually this requires good credit and can end up being more costly than other loan options since additional fees associated with the appraisal, originator, title and closing process can come up.

FHA 203(k) Loans
The federal government backs FHA 203(k) loans, which were established with the intention of revitalizing struggling neighborhoods. Under this loan, borrowers can purchase a property with the cost of repairs and upgrades included. The required down payment is as low as 3.5 percent in most instances.

Make sure to follow the above steps and do your research on loan types as you're planning to renovate your home!

Avoiding Fraud: Key Practices in Real Estate

Whether by compromised data, cracked passwords or phishing, real estate is a target for cyber criminals. More and more, homebuyers and sellers-and the practitioners who serve them-are reporting theft via wire fraud, in which criminals access emails, learn of a pending transaction, and then message phony wiring instructions to victims. Bogus DocuSign emails, emails with illegitimate referrals and ransomware are also on the rise. 

Being a victim of wire fraud can be devastating - the funds are almost always irretrievable once sent. And aside from making off with money, criminals can filch personally identifiable information, or PII, through any or a combination of schemes. 

So how can you protect yourself when buying a home? 

1. Being aware that you may be a target is key to protecting yourself from fraud. By educating yourself on the danger, you're much more likely to identify suspicious activities and changes to procedure that are utilized by hackers.                                               
2. Be sure that you clearly understand the wiring instructions for your transaction, and ensure that you're getting that information from a verified source. Title and settlement companies should send you instructions on your wire transfer through a secured service, not just through an email. Many will also have their standard procedures posted on their website. Make a phone call to a number that's listed on the title or settlement agency's website to speak with a real person to verify the information. Don't just call the number listed at the bottom of the written instructions - that information could be bogus too.                                                                                                                                                      
3. If something seems wrong or fishy, it probably is. If you are sent a message requesting a partial payment, notifying you in a change in the deadline for your transfer, or detailing a new procedure for your wire transfer, don't do anything without talking to your agent. Last minutes changes are a big red flags.

By Suzanne De Vita

Couples able to afford more homes than singles:

A couple with a combined household income of $80,800 could afford 82% of all US homes and would be able to save their down payment in just 5 years.

But for singles, its another story. 

An analysis from Zillow calculates that less than half of all US homes are affordable for a single buyer based on a median household income of $34,500.  And since they don't have the help of a spouse, it could take up to 11 years to save up enough for a standard down payment.

"Nearly two-thirds of Americans agree that buying a home is a central part of living the American Dream, but for unmarried or un-partnered Americans, that dream is increasingly out of reach," said Zillow senior economist Aaron Terrazas. "Single buyers typically have more limited budgets, which means they are likely competing for lower-priced homes that are in high demand. Having two incomes allows buyers to compete in higher priced tiers where competition is not as stiff."

Source: Zilllow.com

Millennials Search for Unconventional Down Payment Funds, but at What Cost?

Rising home prices are standing in the way of millennials who want to buy their first home; however, these challenges are being overcome via some unconventional methods. Millennials are getting creative and finding sources for their down payment by any means necessary. But are these methods hurting the millennial generation financially?

Borrowing from family: Sure, gifted money doesn't sound bad. But what if the families don't have the cash to give? Instead, buyers are asking that their parents' home be refinanced, using the home equity as a way to fund their own home purchase.

Of course, this can be beneficial in multiple-offer situations to get a competitive edge with an all-cash offer, but borrowing from a relative can go south fast. Not being able to pay a bank back can have repercussions like lowering a credit score, but missed payments to a relative can damage familial relations. Is it worth the risk?

Crowdfunding: There are new crowdfunding platforms being introduced every year, and more of them are tapping into the real estate industry. This can be a great way to amass gifted money from friends and family, but not everyone may see it that way. Instead of crowdfunding for their honeymoon, newlyweds are asking their wedding guests to donate toward their first home.

This method can get complicated in the lending world. Buyers will need to look into gifting regulations before accepting any gifted money. 

By Liz Dominguez

Pending Home Sales Better than Expected:

Pending Home Sales in November (signed purchase contracts that are not yet closed) were much stronger than expected (+0.2% vs market expectations of -0.5%) on a month-over-month basis.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 0.2 percent to 109.5 in November from 109.3 in October. With last month’s increase, the index remains at its highest reading since June (110.0), and is now 0.8 percent above a year ago.

Lawrence Yun, NAR chief economist, says contract signings mustered a small gain in November and were up annually for the first time since June. “The housing market is closing the year on a stronger note than earlier this summer, backed by solid job creation and an economy that has kicked into a higher gear,” he said. “However, new buyers coming into the market are finding out quickly that their options are limited and competition is robust. Realtors® say many would-be buyers from earlier this year, stifled by tight supply and higher prices, are still trying to buy a home.”

“The strengthening economy, and expectation that more millennials will want to buy, serve as promising signs for solid home buying demand next year, while also putting additional pressure on inventory levels and affordability,” said Yun.

Source: National Association of Realtors

Home Builder Optimism at Highest Level Since 1999:

Builder confidence in the market for newly-built single-family homes increased five points to a level of 74 in December on the National Association of Home Builders Housing Market Index (HMI) which is the highest reported level since July 1999, over 18 years ago.

“Housing market conditions are improving partially because of new policies aimed at providing regulatory relief to the business community,” said NAHB Chairman Granger MacDonald, a home builder and developer from Kerrville, Texas.

“The HMI measure of home buyer traffic rose eight points, showing that demand for housing is on the rise,” said NAHB Chief Economist Robert Dietz. “With low unemployment rates, favorable demographics and a tight supply of existing home inventory, we can expect continued upward movement of the single-family construction sector next year.”

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

All three HMI components registered gains in December. The component measuring buyer traffic jumped eight points to 58, the index gauging current sales conditions rose four points to 81 and the index charting sales expectations in the next six months increased three points to 79.

Looking at the three-month moving averages for regional HMI scores, the Midwest climbed six points to 69, the South rose three points to 72, the West increased two points to 79 and Northeast inched up a single point to 54.

Source: NAHB

How to Make an Open Floor Plan Work for You

Once a trend, open floor plans have become a staple of most modern homes. An open floor plan generally means the living room, kitchen, and dining room are combined into a large space or great room. Before taking a hammer to all interior walls, it's important to know the structure of your home, as well as the benefits and ways you can accomplish an open concept.

Benefits of an Open Floor Plan

Space
Small, cluttered homes can be transformed into airy, more breathable spaces by knocking down a few dividing walls. A demolition project may seem daunting, but the average cost is just over $3,000. Just be sure to have a professional take a look before wielding a sledgehammer. Hiring a structural engineer will cost you about $500, but you'll save yourself the headache of rebuilds, fines, or structural problems.

Natural Light
Without walls blocking the windows, natural light is able to stream in your home, making the open space seem even larger and more airy. Along with knocking down walls, you can bring natural light into your home by connecting the outdoors to your home's interior with large patio doors. On average, you can install glass doors for about $1,600. 


Inclusivity
It's right there in the title: an open floor plan means more openness and inclusivity in your home. When you're preparing dinner in the kitchen, for example, you won't be closed off from the rest of the house. This is great for both entertaining and every day. When you're entertaining, you can still be a part of the party, even while preparing food and drinks. And as an everyday solution, you're able to keep an eye on children, pets, or—let's be honest—the TV, while still going about your daily tasks.