Homeownership and Well-Being: A Complicated Relationship

Homeownership and Well-Being: A Complicated Relationship

RECBL - Real Estate News

Homeownership has come to represent security and wealth-the American Dream, realized, for millions who place their stake through property. There is evidence, even, that homeownership lends itself to overall satisfaction.

Financially, homeownership is also associated with well-being, according to a new report by the Consumer Financial Protection Bureau (CFPB). The CFPB defines "financial well-being" as "a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future and is able to make choices that allow them to enjoy life."

The first factor is key. The ability to afford a home affects sense of well-being, the report shows. The CFPB assigned respondents to a survey, on a scale of zero to 100, scores of well-being. In comparing homeowners and renters, homeowners averaged a 58, while renters averaged a 49. (As a whole, respondents to the survey averaged a 54.) Generally, Americans in good enough financial straits (in the context of income and savings) are in a position to purchase a home; the capacity to own, therefore, rather than ownership itself, is a predicator of well-being.

Affordability is also impactful in that those with a lower share of their income spent on housing have higher scores of well-being. Respondents paying more than 50 percent of their income on housing averaged a 46.5, roughly 10 points below the 56.51 of respondents who shell out 30 percent or less.

Respondents with "non-retirement investments" have higher scores of well-being, as well. (A house, often, is an appreciating asset, building wealth, as other investments do, over time.) Respondents with even one non-retirement investment averaged a 62, while those without averaged a 51. (Real estate, relatedly, has ranked as the No. 1 investment in several studies.)

"Housing satisfaction" is connected similarly. Respondents "very satisfied" with the place they live averaged a 60; those less than "very satisfied" averaged a 50. One distinction, however: The ability to improve level of satisfaction (buying in a more costly but safer neighborhood, for example) hinges on having the wherewithal to do so.

Financial well-being is also linked to homeownership in unanticipated ways. According to the report, age, education and physical health are the top three influences on financial well-being. Age has implications: Americans at a certain life stage, for instance, could be of the perception that "now" is the time to own a home. If they do not meet that expectation, their sense of well-being could suffer.

A cushion for emergencies, likewise, is related. Respondents with access to at least $2,000 for the unexpected (within 30 days) averaged a score of 62-leaps ahead of the 39 for those without. On the other side of the coin: Respondents who have experienced a "financial shock," such as a major home repair, averaged a 52, while those who have not averaged a 57.

"The strongest relationships to financial well-being appear to be related to savings and security nets," the report states. Homeownership, for most, is both-but its relationship to well-being? Its complicated.

Source: Consumer Financial Protection Bureau (CFPB)

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HOME LOANS FOR VETERANS: EVERYTHING YOU NEED TO KNOW

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(TNS)-If you or your spouse has served in the military or the National Guard, chances are you're eligible for a loan guaranty from the U.S. Department of Veterans Affairs. "VA loans are a low-risk for lenders and a great benefit for veterans," says Patrick Cunningham, vice president and partner at a mortgage company in Fairfax, Va.

The Department of Veterans Affairs reports that more than 631,000 loans for veterans were approved in 2015.

The VA loan guaranty program, part of the 1944 GI Bill of Rights, was designed to ease the transition of veterans into civilian life while also spurring the U.S. economy, says Louise Thaxton, branch manager of a mortgage firm in Leesville, La.

Who Can Finance a Home with a VA Loan 

Many veterans pay attention to their education and medical benefits but are unaware that they may qualify for this homeownership benefit, says Joseph J. Murin of a VA mortgage lender based in Fulton, Md.

Members of the military are eligible for a VA loan guaranty after they have actively served for 90 days during wartime or 180 days during peacetime. Murin says members of the National Guard and reservists are eligible after six years or, if they have been called for active service during wartime, 90 days. Surviving spouses of someone who died during active duty or due to a service-related disability are also eligible.

Criteria for VA financing also includes meeting loan guidelines for credit and income eligibility.

While Thaxton says that typically with a VA loan a co-borrower's income can be considered only if the borrowers are married, two veterans who aren't married can get a VA loan together. A veteran who wants to buy with a non-spouse, non-veteran co-borrower must make a down payment of at least 12.5 percent.

Loans for veterans are generally available for primary residences only.

Why Choose VA? 

Borrowers can finance 100 percent of their home purchase.

"Not only is there no down payment requirement, but eligible borrowers don't pay mortgage insurance as they would with any (Federal Housing Administration) loan or with a conventional mortgage with a down payment of less than 20 percent," says Cunningham.

Loans for veterans typically have interest rates comparable to the best conventional loan rates, he says.

"There's no rate adjustment for a lower credit score, so for someone with a low score that could mean as much as a 1 percent difference on a conventional loan," says Cunningham. "The funding fee for the program pays for a government guarantee to protect lenders in case of a default."

Funding fees range from 1.25 percent to 2.4 percent for first-time VA loan borrowers.

"VA loans are underwritten specifically for veterans and rely on more than just a credit score," says Murin. "We focus mostly on the disposable income of the borrowers since that's the biggest indicator of whether someone will default."

When Should You Use a VA Loan?

You can use your eligibility multiple times, says Thaxton.

You can even have more than one VA loan at a time, depending on how much of your eligibility you used the first time.

"The funding fee will be higher when you take out a second VA loan, sometimes as high as 3.3 percent," says Thaxton.

"Most of our borrowers are refinancing a VA loan with a cash-out refinance to consolidate their debt," says Murin. "Our older borrowers benefit from this opportunity to clean up their finances."

But the 3.3 percent funding fee can be cost-prohibitive for veterans refinancing from an FHA or conventional loan into a VA loan, says Cunningham.

A VA loan expert can help you compare other loan options and decide whether the funding fee is costlier than paying mortgage insurance, says Thaxton.

Where Can You Use a VA Loan? 

While loans for veterans are available throughout the U.S. for properties with one to four units, the limits on the loans vary according to housing costs in your county. The VA loan limits conform to the limits for conventional financing established by the Federal Housing Finance Agency. The limit is $417,000 in most areas and up to $625,500 in high-cost housing markets.

"The ability to buy a house for as much as $625,500 in the D.C. area without a down payment is a great benefit for vets," says Cunningham. "In addition, if you want to use a jumbo VA loan and buy a more expensive property, you just have to make a down payment of 25 percent of the difference between the home price and the loan limit."

For example, buyers of a $700,000 home would need to pay 25 percent of $74,500 (the difference between $700,000 and $625,500), or $18,625, a significant savings compared with a traditional jumbo loan. A 5 percent down payment on a $700,000 loan would be $35,000.

How to Apply

The first step for borrowers is to obtain a certificate of eligibility for a VA loan through the VA office or a lender. Next, borrowers need to find a lender experienced with VA loans.

"It's important to find a lender experienced with VA loans who can also be an advocate for the veteran," says Murin.

Borrowers can work with a lender to decide how to pay the funding fee, which varies depending on your service and the amount of the down payment, if any.

Some disabled veterans can get the fee waived, says Cunningham.

Once borrowers have a loan pre-approval, they can begin looking for a home to buy and make an offer. Loans for veterans require a VA appraisal and a VA home inspection to make sure the property is priced appropriately and is habitable.

Up to 4 percent of closing costs can be paid by the seller, says Cunningham.

(C)2016 Bankrate.com

Distributed by Tribune Content Agency, LLC​​

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HUD AND VA WORK TO FIND PERMANENT HOMES FOR HOMELESS VETERANS

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The U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of Veterans Affairs (VA) recently announced a second round of funding to help provide permanent homes to an estimated 108 veterans experiencing homelessness in seven states.

The rental assistance announced today is provided through the HUD-Veterans Affairs Supportive Housing (HUD-VASH) Program which combines rental assistance from HUD with case management and clinical services provided by VA (see attached list of HUD's voucher awards).

Recently, HUD, VA and the U.S. Interagency Council on Homelessness (USICH) announced the number of veterans experiencing homelessness in the United States has been cut nearly in half since 2010. The data revealed a 17 percent decrease in veteran homelessness between January 2015 and January 2016-quadruple the previous years annual decline-and a 47 percent decrease since 2010. Additionally, while answering the Obama administration'sMayor's Challenge to End Veteran's Homelessness, several mayors have declared their cities have officially ended it.

"There is momentum across the nation as community after community effectively ends veteran homelessness," says Secretary Juli?n Castro. "Today's funding will help more cities reach this important goal and ensure that we serve the brave men and women who have served and sacrificed for us. HUD and its local partners are determined to give every veteran the opportunity to secure a safe, stable place to call home."

"The dramatic reduction in Veteran homelessness in recent years would not have been possible without the pairing of housing choice vouchers with case management and supportive services under the HUD-VASH program to help the most vulnerable Veterans become and remain stably housed," says VA Secretary Robert A. McDonald. "The HUD-VASH awards announced today will support the ongoing and important work underway to ensure that homelessness among Veterans is rare and non-recurring."
In June, HUD awarded nearly $38 million to help more than 5,200 homeless veterans find homes. That funding ensured that communities could provide the critically needed housing assistance and case management services to those veterans and their families experiencing homelessness.

In 2010, President Obama and 19 federal agencies and offices that form the U.S. Interagency Council on Homelessness (USICH) launched the nation's first comprehensive strategy to prevent and end homelessness.Opening Doors: Federal Strategic Plan to Prevent and End Homelessness serves as a roadmap for how the federal government will work with state and local communities to confront the root causes of homelessness, especially among former servicemen and women. To support communities as they progress towards the goal of ending veteran homelessness, USICH has identified strategies that increase collaboration and coordination among programs serving veterans experiencing homelessness.

Since 2008, more than 79,000 vouchers have been awarded and approximately 111,000 homeless veterans have been served through the HUD-VASH program. Rental assistance and supportive services provided through HUD-VASH are a critical resource for local communities in ending homelessness among our nations Veterans.

In the HUD-VASH program, VA Medical Centers (VAMCs) assess veterans experiencing homelessness before referring them to local housing agencies for these vouchers. Decisions are based on a variety of factors, most importantly the duration of homelessness and the need for longer term, more intensive support in obtaining and maintaining permanent housing. The HUD-VASH program includes both the rental assistance the voucher provides and the comprehensive case management that VAMC staff offers.

Veterans participating in the HUD-VASH program rent privately owned housing and generally contribute no more than 30 percent of their income toward rent. VA offers eligible homeless veterans clinical and supportive services through its medical centers across the U.S., Guam, Puerto Rico and the Virgin Islands.

For more information, visit www.hud.gov.

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LOW-INCOME EARNERS STRUGGLE MOST WITH MORTGAGE PAYMENTS

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​​People with low incomes spend nearly 23 percent of their income on monthly mortgage payments, compared to high-income earners, who spend 11.5 percent of their income on monthly house payments, according to a new Zillow(R) analysis.

Compared to the past, mortgage payments are very affordable for the average American because of persistently low mortgage rates. But that doesnt tell the whole story. To see how different groups are faring in terms of housing affordability, Zillow divided income earners and homes into three tiers, assuming that low-income earners buy less expensive homes, median earners buy median homes, and high-income earners buy more expensive homes in the top third of the market.

The results show that lower earners carry a heavier burden when it comes to making monthly payments. Their incomes have been largely stagnant, while low-priced homes are gaining value fastest.  Low-income earners could expect to spend nearly 40 percent of their income on housing in 2007. For people in the top third of incomes, the peak was in 2006, when they could expect to spend just over 20 percent of their income on a mortgage. 

In some large markets, the amount low-income workers spend on housing is much greater. In Los Angeles, people who earn the least could expect to spend more than three-quarters of their income on housing alone. For the top earners, mortgage payments only took up 27.5 percent of their income - a difference of nearly 50 percentage points.

"Housing affordability is a different story for low-income Americans than for median and high-earning people," says Zillow Chief Economist Dr. Svenja Gudell. "They are spending much more of their income on housing, even when they buy the least expensive homes. On top of that, we know that the least expensive homes are gaining value the fastest and are the most scarce, making it hard to find a home to buy even if you can afford one. From a high level view, mortgage affordability looks pretty good across most of the country, but its not good for everyone."

The cost of housing exceeds 30 percent of the median income, the traditional rule for housing affordability, in about one-third of major markets for lower wage earners, and is above 50 percent in Los Angeles, San Jose, San Francisco, and San Diego. By contrast, San Jose is the only place where high-wage earners can expect to spend more than 30 percent of their income on housing.

For more information, visit www.zillow.com.

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STUDENT DEBT AND AFFORDABILITY CREATE RIFT BETWEEN HOMEOWNERS AND RENTERS

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​​​​​​​​​​Despite lackluster economic growth and stark home-price appreciation in several parts of the country in recent months, roughly three-quarters of surveyed households still believe now is a good time to buy a home, but there's a considerable gap in morale between homeowners and renters, according to the latest installment of the National Association of REALTORS(R) Housing Opportunities and Market Experience (HOME) survey. The survey also found that roughly half of young adults with student debt are uncomfortable about taking on a mortgage.

In NAR's second quarter HOME consumer survey, respondents were asked about their confidence in the U.S. economy and various questions about their housing expectations, including questions on if carrying student debt is tempering their ability and appetite to take on mortgage debt.

Through the first half of the year, NAR's survey found that the share of homeowners and renters who believe now is a good time to buy a home is mostly holding steady, with 80 percent of homeowners (82 percent in March) and 62 percent of renters (unchanged from last quarter) saying it's a good time to buy. However, the share of renters who think so is down from 68 percent in December 2015, and those under 35 were the least confident that now is a good time to buy.

Lawrence Yun, NAR chief economist, says the survey brings to focus the ongoing disparity in buyer confidence between current homeowners and renters. "Existing-home prices surpassed their all-time peak this spring and have climbed on average over 5 percent nationally through the first five months of the year and even faster in areas with severe supply shortages," he said. "Most homeowners appear to realize that if they're ready to sell, they'll likely find a buyer rather quickly and be able to use the sizeable equity they've accumulated in recent years towards their next home purchase. Meanwhile, renters interested in buying continue to face minimal choices, strong competition and home prices growing faster than their incomes."

Adds Yun, "Given these affordability pressures, it's no surprise respondents earning over $100,000 and those living in the Midwest - the most affordable region of the country - are the most optimistic about buying right now."

This quarter's HOME survey also revealed that carrying student debt is causing many to be uneasy about taking on additional debt. According to the survey, roughly two-thirds of non-homeowners and half of respondents under 35 with student debt said they aren't comfortable also having a mortgage. Furthermore, of those with student debt, non-homeowners and younger adults were less likely to believe they'd be able to qualify for a mortgage if they applied.

"It's becoming very evident from this survey and our research released last month that the financial and emotional impact of repaying student debt is contributing to a delay in purchasing a home for many would-be buyers," adds Yun. "At a time of quickly rising rents, mortgage rates at all-time lows and increasing housing wealth, a lot of young adults in their prime buying years are struggling to enter the market and are ultimately missing out on the stability and wealth accumulation that owning a home can provide."

Mostly unchanged attitudes about direction of U.S. economy, personal financial outlook
A tick under half of all households in the survey believe the economy is improving (49 percent), which is mostly unchanged since the inaugural HOME survey in December 2015. Renters, respondents living in urban areas, and those in the West were the most optimistic. On the other hand, nearly two-thirds of those living in rural areas don't believe the economy is improving.

Reflecting somewhat lessening confidence that respondents' financial situation will be better in six months, the HOME survey's monthly Personal Financial Outlook Index of all households slightly decreased (to 57.7 in June) since March (58.1), but is unchanged from June 2015.

Expanding belief that now is a good time to sell
With strong price growth prevalent in most of the country and homes selling at a quickened pace, more current homeowners (61 percent) believe it is a good time to sell compared to the first quarter of this year (56 percent). Respondents in the West were once again the most likely to think now is a good time to sell, while also being the least likely to think now is a good time to buy.

"More homeowners acknowledging this pent-up demand may perhaps mean we begin to see more supply come online in the near future," adds Yun. 

When asked about their outlook for home prices in their community in the next six months, almost all believe that prices will stay the same or rise (93 percent), which is consistent with last quarter (91 percent). Respondents from the West, those living in urban areas and renters are most likely to believe prices will go up in their communities.

For more information, visit www.realtor.org.

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