Interested in Becoming a Military Landlord?

Thinking About Renting Out Your Home? Here’s What to Consider As you prepare for your next move, have you thought about renting out your current home instead of selling it? Becoming a military landlord may require effort and planning, but with the help of a professional property manager, it’s entirely achievable. Real estate investments can also be an effective way to build wealth over time. Here are some essential factors to keep in mind as you decide whether renting is right for you. Is Your Home a Good Rental Candidate? Assess whether your home’s location will attract renters. Is it in a desirable neighborhood, close to schools, shopping, and entertainment? Military areas typically have a strong rental market, but it’s essential to confirm there’s enough demand in your specific area. Also, consider if the home is in good condition and well-maintained—renters are often drawn to properties that are move-in ready. Evaluate the Financials When deciding between renting or selling, treat it as a business decision. Is your home’s current market value greater than your remaining mortgage? If selling, would you be able to cover closing costs, transaction expenses, or repairs? If renting, ensure the rental income can cover expenses like your mortgage, insurance, property taxes, HOA fees, and property management costs. Consulting a tax advisor can help clarify how rental income and expenses may affect your tax liability. Pro Tips for Military Landlords Capital Gains: Income from selling your home may incur capital gains tax. However, reinvesting the income in another property within two years can defer or avoid the tax. Preparing Your Home: Before renting, make sure everything is in working order and consider neutral updates, such as fresh paint. A property manager can assist with tenant screening, maintenance, and setting clear guidelines on tenant responsibilities like lawn care and security. Support from a Property Manager Hiring a property manager can make the process easier by handling tenant selection, property inspections, maintenance, and financial tracking. If your property is located in the Hampton Roads, Southeastern Virginia, or Northeastern North Carolina areas, reach out to us for a referral to a property manager who can discuss options with you. Plan for Vacancies While the rental market is generally strong, it’s wise to have three to five months’ worth of mortgage payments in a reserve fund in case of vacancy. Start saving now to ensure you’re financially prepared for any gaps in occupancy. Get Proper Insurance Coverage Owning a rental property requires different insurance than a primary residence. Landlord insurance protects you from property damage, while vacant property insurance can provide added coverage if your home will be unoccupied for extended periods. An umbrella policy can offer additional liability protection beyond your standard coverage. Stay Connected to Your Investment Treat your rental property as an investment and stay informed about the neighborhood. Following community pages or the HOA on social media, or using platforms like Nextdoor, can help you stay updated. If you notice any concerns, notify your property manager. Share Your Experience Are you a military member with advice or experiences to share about renting out a home? Let us know in the comments to help others considering this path. We’d love to hear from you!

How to Build Credit

Building a credit score is crucial in the years leading up to buying a home. If you’ve never opened a credit card or taken out a loan, you might have zero credit, which can make it difficult for a lender to assess your reliability as a borrower. Without a credit history, getting approved for a loan may be challenging. If you're just starting to build your credit, here's a guide to help you get on track. What Is a Credit Score? Your credit score is a number that reflects your creditworthiness, essentially how likely you are to repay borrowed money. Lenders use this score to evaluate you when you apply for a mortgage, car loan, or credit card. Credit scores range from 300 to 850, with a higher score indicating better creditworthiness. The three major credit bureaus—Equifax, Experian, and TransUnion—track your credit activity and assign a score based on several factors: Payment history (35% of your score): Whether you’ve made payments on time. Credit utilization (30%): The percentage of your available credit you're using. Credit history length (15%): How long you’ve had credit. Credit mix (10%): The types of credit you have (e.g., credit cards, loans). New credit activity (10%): How often you've opened new accounts or requested credit. Steps to Build Credit Follow these tips if you’re just starting to establish your credit history. If you already have credit and want to improve your score, these strategies can still help. 1. Open a Secured Credit Card A secured credit card is a great way to begin building credit. You deposit a certain amount of money, which becomes your credit limit. For example, if you deposit $500, that’s the most you can spend on the card. You’ll need to make regular payments to restore your available credit. Secured cards report your activity to the credit bureaus, so on-time payments help build your credit history. Another option is to ask someone with established credit to co-sign for a credit card. Just remember that missed payments on either party's part can affect both credit scores. 2. Become an Authorized User If someone with good credit (like a family member) adds you as an authorized user on their credit card, you can benefit from their positive payment history. Keep in mind that while this helps establish credit, relying on someone else's credit profile won’t give you the independence lenders look for when you apply for your own loan. 3. Keep Your Balance Low Aim to use less than 30% of your available credit each month, as credit utilization makes up 30% of your score. Ideally, pay off your balance in full each month. If necessary, make several smaller payments throughout the month to keep your balance low. 4. Set Up Automatic Bill Payments Many service providers report payment history to the credit bureaus, so paying bills on time—such as for utilities or a phone plan—can help build credit. Set up automatic payments to avoid missing due dates. 5. Request a Credit Limit Increase Once you’ve used your credit responsibly for a few months, consider asking your credit card issuer for a credit limit increase. This helps lower your credit utilization ratio. Be sure to confirm that your request won’t trigger a hard inquiry on your credit report, which can temporarily lower your score. 6. Maintain a Savings Account Having a savings account can prevent you from relying on credit in emergencies, helping you avoid high utilization rates. It also looks good to lenders when applying for larger loans in the future. 7. Open a Second Credit Account Once you've built up some credit history, you might consider opening another account to diversify your credit mix. But wait at least two months before applying for a new card to allow your credit score to reflect your current account. Whether you opt for another credit card or a loan, having different types of credit can positively impact your score. 8. Use Free Credit Reporting Tools Some bills, like rent or subscription services, don’t always appear on your credit report. However, there are tools like Experian Boost or UltraFico that allow you to add these on-time payments to your report to boost your score. 9. Monitor Your Credit Regularly Check your credit report regularly to catch any errors or signs of fraud. You’re entitled to one free report each year from each credit bureau via AnnualCreditReport.com. Look for inaccuracies or unexpected changes, and dispute any errors to protect your score. 10. Keep Credit Accounts Open Length of credit history is a major factor in your score, so try not to close credit accounts, even if you don’t use them. Keeping old accounts open boosts your credit age and helps your score. If a card has high fees, consider upgrading it to a better one instead of closing it. Why Is Establishing Credit Important? A good credit history makes it easier to qualify for a mortgage, car loan, or credit card. The better your score, the lower your interest rates will likely be, saving you money over the life of the loan. How Long Does It Take to Build Credit? It usually takes three to six months of credit activity for the bureaus to generate a score. About 35% of your score is based on your payment history, so timely payments over a few months will help build your credit. The Fastest Way to Start Building Credit Opening a secured credit card and being added as an authorized user on an account with a good payment history are two of the quickest ways to build credit. These actions, combined with responsible credit use, can help establish a solid credit score within a few months.

What Is Escrow?

When buying a home, you’ll likely hear your lender or real estate agent mention the term "escrow." Escrow refers to a few different processes, from when your offer is accepted to the day you close on the home, and even after you become a homeowner with a mortgage. There are two types of escrow accounts: One that’s used during the home buying process until you close on the home. Another, often called an impound account, that is used by your mortgage company to manage property tax and insurance payments on your behalf after closing. What Is an Escrow Account? An escrow account is a neutral third-party arrangement where funds are held until specific conditions are met. A title company or escrow agent will open this account after you and the seller agree on a price and sign the purchase agreement. During the home buying process, the escrow account serves two purposes: Holding earnest money: This is a deposit showing your good faith in purchasing the home. Managing funds: It handles the distribution of funds for closing costs, property taxes, and insurance premiums. How Does Escrow Work? Throughout the process, the escrow agent manages the transfer of the property, money, and documents, ensuring that both the buyer and the seller meet their obligations. This system safeguards both parties, ensuring neither is favored over the other. What Does "In Escrow" Mean? When you hear that a home is "in escrow," it means the necessary documents, money, and conditions are being held by a neutral party (the escrow agent) until all conditions of the purchase agreement are met, such as receiving an appraisal and securing financing. What Does It Mean to Close Escrow? Closing escrow means that all terms of the escrow agreement have been fulfilled, including securing financing and the legal transfer of the property title from seller to buyer. At this point, a closing agent will disburse the funds, ensure all documents are signed, and the title is officially transferred to the buyer. What Is an Escrow Payment? An escrow (or impound) account is also used after you buy a home to manage property tax and insurance payments. Your lender will collect a portion of your property taxes and insurance premiums as part of your monthly mortgage payment. The lender holds these funds in the escrow account and pays these bills on your behalf when they're due. How Monthly Escrow Payments Work Your monthly mortgage payment will include a portion for escrow, which covers your property taxes and insurance. If there’s ever a shortfall in the account, your monthly payments might increase to cover the difference. Initial Escrow Payment at Closing At closing, your lender will usually require a few months’ worth of taxes and insurance premiums to be pre-funded in the escrow account. These funds are not extra closing costs but prepayments to ensure there’s enough money to cover upcoming bills. Your Escrow Analysis Statement Your mortgage servicer will provide an annual escrow analysis statement showing how much has been collected, what has been paid, and whether your escrow payments need to increase or decrease based on changes to your property taxes or insurance premiums. Is an Escrow Account Required? Escrow accounts are typically required for certain types of loans (such as VA, FHA, and some conventional loans). In some cases, lenders may allow you to pay taxes and insurance directly instead of through an escrow account, though they might charge a fee or higher interest rate for this option. Even if not required, many homeowners opt to use escrow accounts voluntarily to simplify their finances, break up large tax and insurance bills into smaller monthly payments, and avoid the risk of missing payment deadlines.

Inspection vs. Appraisal for Home Buyers

Inspections and appraisals are crucial steps in the home-buying process, providing valuable insights to help you make an informed decision. While they serve different purposes, both protect your financial investment and give you peace of mind about the home's condition and value. What’s the Difference Between an Appraisal and an Inspection? The main difference is their focus: Appraisal: Determines the fair market value of the home, typically required by lenders to ensure they're not lending more than the property is worth. An appraiser evaluates the home’s features, condition, and location, comparing it to similar properties that have recently sold in the area. Inspection: Focuses on the home’s condition. A licensed home inspector conducts a detailed review of the property’s major systems (plumbing, electrical, HVAC, roof, etc.) to identify any necessary repairs or potential issues. Are Appraisals and Inspections Required? Appraisals: Most lenders require an appraisal to approve a loan. Inspections: Though not usually required for conventional loans, home inspections are strongly recommended to avoid unexpected repairs. FHA and VA loans often require an inspection. What Happens During an Appraisal? An appraiser walks through the home to assess its value, considering factors like location, size, and condition. They compare it to recent sales of similar homes nearby. The appraisal report provides an estimate of the home’s market value, which is typically shared with the buyer and the lender. What Happens During a Home Inspection? A licensed inspector spends several hours evaluating the home’s condition, checking the functionality of key systems such as the foundation, roof, plumbing, and electrical systems. Afterward, the inspector provides a detailed report that outlines any recommended repairs or replacements. What If the Appraisal Comes in Low? A low appraisal can complicate financing, as lenders may not approve a loan for more than the appraised value. Options for buyers include contesting the appraisal, paying the difference in cash, or negotiating a price reduction with the seller. Do I Need Both an Appraisal and an Inspection If I’m Paying Cash? Even when paying cash, both are advisable. An appraisal ensures you’re not overpaying, and an inspection helps identify potential costly repairs. Specialized Inspections In addition to the standard home inspection, your inspector may recommend specialized inspections for issues like radon, pests, or septic systems. Importance of Home Inspections A home inspection is a small upfront cost compared to the potential for large, unexpected expenses. Skipping an inspection could mean taking on responsibility for significant repairs after closing. It’s essential, even in states that require sellers to disclose known issues, as an inspection can uncover hidden problems. How Are Appraisals and Inspections Similar? Both require licensed professionals and occur during the escrow period. The buyer typically pays for both. Both can impact negotiations. If issues are found during an inspection, buyers may request repairs or credits, and a low appraisal can lead to price adjustments. Inspections and appraisals work together to help you avoid potential financial risks and ensure you’re making a smart investment in your new home.