How to Save for a Down Payment on Your Dream Home

Buying a home is an exciting milestone that not only represents success and achievement but is also a setting where many memories will be made with family and friends. As you move forward toward an actual purchase, however, coming up with a down payment may feel daunting, if not impossible. For many homes, the average expected down payment can be 20% of the home price. For instance, 20% would translate to plunking down $100,000 cash for a $500,000 home. Plus, closing costs can add up to another $20,000 or more; interest rates are high; and inflation isn’t exactly low either.

Given the financial commitment that buying a home requires, you will want to have a plan in place as you balance other priorities like saving for your kids’ education. Fortunately, help is out there. Below, we’ve compiled a list of tips with some invaluable resources for planning and saving for a down payment—including a useful solution in the Wells Fargo Mobile® app that can help you start saving now for your future dream home to help you act fast when you find one that you love.

1. Prioritize Access and Growth for Down Payment Savings

Often, vessels with higher-growth potential (i.e., stock mutual funds, stock portfolios) require some lead time before you liquidate, or cash out. Conversely, accounts where your cash is easily accessible, like standard savings accounts, often don’t offer the highest of returns. So, you may want to save aggressively for the long term a few years or more before beginning your home search. Then, withdraw the funds you’ve earmarked for a down payment into a more liquid account when you officially kick off your search. You don’t want to lose out on a house in an ideal neighborhood because your funds aren’t easily accessible.

LifeSync® in the Wells Fargo Mobile® app can help you keep track as you work towards your personal financial goals, like buying a home, through content personalized for you. It helps you create a specific goal amount and track progress toward that goal, and it offers market commentary, timely insights, and contextual information.

2. Talk to Mortgage Brokers

Mortgage brokers are well-versed in interest rates, bank mortgage products, and the economic factors at play. They may be aware of programs that help first-time homebuyers through tax credits, reduced interest rates, and programs specifically tailored to students, former members of the military, senior citizens, and others. They also can help you figure out the down payment/mortgage loan ratios that may work best for you. An extra $50,000 down at a 7% interest rate equates to about $416/month. When you engage with a broker, they will want to do a credit check, but you can come prepared with other data about your personal finances through LifeSync® in the Wells Fargo Mobile® app.

3. Research Government Programs and Partnerships

Through your local or state government, you may have access to down payment assistance programs in which nonprofit organizations or the city itself partner with banks who see the borrowers—especially first-time homebuyers—as possible new clients.

Often, state and local governments have their own programs. Vermont, for example, offers a Down Payment Assistance (DPA) program in which the state provides assistance through a non-amortizing, 0% second mortgage (for which the borrower does not have to pay the principal owed until the loan is due). New York City offers the HomeFirst Down Payment Assistance Program, which offers qualifying homebuyers up to $100,000 toward the down payment or closing costs. Begin researching programs like these through your city or town’s local lenders and your state housing commission.

4. Look Into Your Employer Benefits

Often employers, including hospitals and universities, offer financial assistance that may be forgiven over a number of years or offered as a gift outright. According to Fannie Mae, these can come in the form of a grant; a direct, fully repayable second mortgage or unsecured loan; a forgivable second mortgage or unsecured loan; or a deferred-payment second mortgage or unsecured loan (“deferred-payment” meaning you do have to pay it back, but you can do so at a specified later time). Funds generally must come directly from the employer.

It’s worth checking to see if your employer offers Fannie Mae’s Employer Assisted Housing (EAH) down payment assistance program, as the loan is forgiven 20% per year for five years, with no principal or interest payments required from the employee as long as you remain with the company. This means you effectively pay off the loan just by staying at your current company.

5. Understand Affordability and Budgeting

Regardless of these affordability programs, keep in mind what is affordable for you. Experts estimate that your monthly house payment (including principal, interest, taxes, and home insurance) should not exceed 28% of your gross monthly income. So, look at what you make per month before taxes, multiply it by 0.28, and that’s the maximum you should look to spend on this important investment.

Buying a home is a significant financial commitment that requires careful planning and saving. By prioritizing your savings strategy, exploring mortgage options, researching government and employer programs, and understanding your budget, you can make the dream of homeownership a reality. Utilize tools like the Wells Fargo Mobile® app to stay on track with your financial goals and make informed decisions along the way.

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Understanding Land Collateral Loans: A Comprehensive Guide

Securing a large loan can be challenging, even for financially stable individuals. However, one viable option is using land as collateral, much like a home equity loan. Instead of borrowing against the equity in your home, you borrow against the equity in your land. Here’s a detailed look at land collateral loans and how they can work for you.

Land collateral loans are secured loans where your property guarantees the loan. If you fail to repay the loan, the lender can seize the property to cover the remaining balance. This added security often makes lenders more willing to approve these loans, potentially offering lower interest rates and higher borrowing limits compared to unsecured loans, which rely solely on the borrower’s income and credit history.

“One of the benefits of using land as collateral for a loan is that it allows you to take out a loan without risking assets such as your home, car, savings, or stocks,” says John Sport, vice president of First South Farm Credit. “In some situations, the collateral (land) can be used in lieu of a down payment, allowing the borrower to hold onto their cash.”

To secure a loan using your land as collateral, the lender must first approve you and determine that the land’s equity value meets or exceeds the loan amount. After approval, a lien is placed on the land, which will be released once the loan is fully repaid.

The first step in using land as collateral is determining its value. A rural land real estate appraiser typically assesses the land, considering factors such as location, condition, timber quality, and infrastructure. Additionally, the land must be free of any debt restrictions and available to be pledged as collateral.

“The value of the land is best determined by a rural land real estate appraiser,” Sport explains. “Once these initial concerns are addressed, the borrower and lender can discuss the structure of the loan that works for both parties.”

Land equity loans are versatile and can be used for various purposes, including:

– Acquiring Additional Land: Many landowners use equity in their land to purchase more rural land.
– Land Improvements: This includes building ponds, barns, or other structures to enhance the property.
– Construction Loans: You can use land as collateral for construction loans to build or improve a home on the property. This can reduce or eliminate the down payment required for such loans.

“Those who are ready to improve or construct a home on their rural home sites can use land as collateral for an improvement/construction loan,” says Brandon Simpson, loan officer for First South Farm Credit.

Using land as collateral for personal loans varies depending on the lender and the loan’s purpose. If the loan is for debt consolidation unrelated to rural land or farming operations, a Farm Credit lender may not accommodate the request. It’s best to discuss all details with a loan officer to determine eligibility.

“Farm Credit is tied to rural agricultural lending for full and part-time farmers as well as rural landowners,” Simpson notes.

The most common use of land as collateral is to purchase more land. “If you don’t want to use cash for a down payment, you can pledge the land you own to reduce or eliminate your down payment,” Simpson adds. However, using land as collateral ties up the asset for the loan’s duration, and the lender can take possession if the loan terms are not met.

Advantages and Disadvantages of Land Collateral Loans

Advantages:
– Secured Financing: The land provides sufficient collateral, potentially offering favorable loan terms and freeing up cash for the borrower.
– Lower Risk to Other Assets: Allows you to take out a loan without risking other assets like your home or car.
– Flexible Use: Can be used for various purposes, including land acquisition, improvements, and construction.

Disadvantages:
– Asset Tied Up: The land is tied up as collateral for the loan’s duration.
– Foreclosure Risk: The lender can seize the land if loan terms are not met.

Key Questions to Ask Lenders

Before proceeding with a land collateral loan, ask your loan officer these questions:
– Can I use my land as collateral for a specific type of loan?
– What is involved in using my land as collateral?
– Do I need an appraisal?
– Are there any fees involved?
– How does using land as collateral impact my payments and loan terms?

Is a Land Equity Loan Right for You?

Deciding whether a land equity loan is right for you is a personal decision. Generally, if using land as collateral can reduce your payments and offer favorable loan terms, it’s a good option to consider. However, fully understand the risks and implications of using your land as equity for an additional loan.

“In some situations, using land as collateral for a loan can reduce your payments and provide other favorable loan terms,” Sport says. “But the borrower needs to fully understand the risk and implications of using their existing land as equity for an additional loan.”

By understanding land collateral loans and carefully considering your options, you can make an informed decision that aligns with your financial goals and needs.

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Negotiations Continue Over Sale of Avondale Global Gateway Amidst New Developments

Four months after negotiations were put on hold due to scrutiny from state leaders, the owners of Avondale Global Gateway are still actively seeking to finalize the sale of the West Bank industrial complex to the Port of South Louisiana. This ongoing dialogue comes as Avondale officials inaugurated a new $2 million trucking gate, aiming to boost the facility’s operational efficiency.

The initial agreement, which saw the Port of South Louisiana offer $330 million for Avondale, was suspended last October after members of the Louisiana Bond Commission raised concerns about the valuation and strategic justification of the purchase. The offer had already seen a significant reduction from an earlier proposal of $445 million, adjusted after a consultant’s report suggested the initial terms were overly optimistic about Avondale’s potential to attract industrial tenants.

Despite these setbacks, both parties remain committed to the negotiation table. “Host continues to work with Port of South Louisiana on the sale of Avondale,” stated a spokesperson from T. Parker Host during the recent ribbon-cutting ceremony for the new trucking gate. This sentiment was echoed by Micah Cormier, a spokesperson for the Port, who indicated ongoing discussions but no fixed timeline for revisiting the Bond Commission or amending the terms further.

The Bond Commission’s approval is crucial as it involves the sale of approximately $400 million in bonds needed to finance the acquisition, inclusive of additional funds to cover initial interest payments. With several new faces in the commission following recent elections, including John Fleming as the new chair, the dynamics of approval could shift, potentially impacting the deal’s prospects.

The addition of the new trucking gate at Avondale, funded partly by a $1.5 million state grant, marks a significant upgrade for the facility. The gate features a scale house for weighing trucks and enhanced roadways and drainage systems, designed to streamline operations. “This gate complex will allow us to shave precious minutes off each shipment,” remarked Matthew Mancheski, CFO of T. Parker Host. He highlighted the facility’s handling of approximately 100 trucks daily and its readiness for anticipated growth.

Avondale’s transformation under Host’s ownership since its $60 million purchase in 2018 is notable. The site, historically significant for building U.S. Navy warships, is being repurposed as a manufacturing and transshipment hub. With an additional $90 million invested in remediation and upgrades, the facility aims to attract significant private investment and generate thousands of jobs, as forecasted in reports by Avondale and the Jefferson Parish Economic Development Commission (JEDCO).

Local economic development officials and politicians have shown strong support for the project, recognizing its potential to revitalize an area once known as Louisiana’s largest employer. The state’s investment in reconnecting Union Pacific rail links and other infrastructure improvements underscores a commitment to enhancing Avondale’s attractiveness to major manufacturers and logistics companies.

As negotiations continue and Avondale gears up for future growth, the industrial complex stands at a crossroads of historical significance and modern economic development, promising to redefine the industrial landscape of the region.

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Strategies for Securing Lower Rates in 2024

The mortgage landscape has been turbulent for homebuyers over the past few years, with rates experiencing significant fluctuations. After hitting record lows in 2020 and 2021, mortgage rates soared in 2022 and 2023, driven by inflation concerns and higher benchmark interest rates. By the summer of last year, rates reached levels not seen since 2000. Although there has been a slight decrease, the average rate for a 30-year mortgage still stands at a daunting 6.91% as of late March 2024.

Despite these challenges, there are strategic ways for buyers to secure more favorable mortgage rates, even in a less-than-ideal rate environment. Here’s a breakdown of three effective strategies to consider:

1. Stay Informed and Ready to Lock in Rates

Mortgage rates are subject to daily changes influenced by a myriad of economic factors. This dynamic nature of rates means that vigilance is key. Keeping a daily check on rates can help you lock in a favorable rate before another fluctuation. With critical economic updates, such as the upcoming inflation report on April 10 and the Federal Reserve meeting on April 30, poised to potentially impact rates, understanding these trends is crucial.

2. Be Prepared to Act Quickly

The ability to act swiftly on locking in a mortgage rate can be the difference between securing a manageable rate and being subject to a higher one, especially when economic indicators point to possible rate increases. For instance, if economic forecasts suggest a potential rate hike, securing a rate before such changes are officially announced can be beneficial. Even if predictions do not materialize, borrowers have options such as unlocking and re-locking a rate or refinancing in the future.

3. Explore Rate-Reduction Strategies

While today’s rates might be higher on average, that doesn’t mean you’re stuck with them. Buyers can employ strategies like buying mortgage points or opting for an adjustable-rate mortgage (ARM):

– Purchasing points involves paying an upfront fee to the lender to lower your interest rate. For example, buying points could reduce a rate from 6.75% to 6.25%, representing significant long-term savings on interest payments.

– ARMs offer initial rates that are typically lower than fixed rates. This can be particularly appealing for those who plan to refinance before rates adjust. While ARMs introduce some rate variability, they are structured with an initial fixed period, which provides temporary stability.

These strategies, although requiring some upfront investment or acceptance of future rate variability, can provide substantial savings and more manageable payments in a high-rate environment.

In summary, while the current mortgage rates in 2024 are far from the historic lows of previous years, proactive and informed homebuyers still have avenues to secure more favorable terms. By staying informed about daily rate changes, being ready to lock in rates swiftly, and understanding the mechanisms of mortgage points and adjustable-rate mortgages, buyers can navigate the complexities of today’s mortgage landscape more effectively.

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New Orleans Moves Forward with Transformative Riverfront Park Project

The long-anticipated vision for transforming the Mississippi Riverfront into a continuous expanse of public parks is making significant strides. The New Orleans City Council has approved a $15 million investment toward the redevelopment of two historical wharves located in the French Quarter and Marigny. This funding, derived from city bond resources, constitutes half of the total projected cost, with the remaining balance provided by the Audubon Nature Institute, which is spearheading the project.

This ambitious initiative aims to convert a 0.3-mile stretch of the riverfront into a vibrant green space adorned with lawns, gardens, concession stands, and various recreational areas. It is strategically positioned between the developed regions of the upper French Quarter and the Marigny and Bywater neighborhoods. Once complete, the project will create 2.25 miles of continuous riverfront parkland, bridging these historic areas with accessible and engaging outdoor spaces.

Nathan Chapman, president of the Vieux Carre Property Owners, Residents, and Associates, expressed the community’s anticipation and support for this transformative project, highlighting its potential to enhance the quality of life and environmental beauty of the area.

The redevelopment focuses on the wharves at Esplanade Avenue and Gov. Nicholls Street, structures with rich histories dating back to before the 20th century. Initially, the Audubon Institute planned to shoulder the financial burden of this project alone. However, the escalating costs, exacerbated by the pandemic, led to a request for municipal support. Mayor LaToya Cantrell pledged to back the project last year, culminating in the recent allocation of funds.

Despite this significant step forward, various details remain to be finalized, including updated designs, budget forecasts, and construction timelines from the Audubon Institute. Laurie Conkerton, Audubon’s chief administrative officer, has indicated that these critical components are expected to be completed and approved within the upcoming month.

One of the unresolved issues includes the future management and maintenance of the site post-construction, especially considering the estimated $1.5 million annual cost associated with these responsibilities. Discussions have been held with the French Market Corp., which has shown interest in overseeing the site, though no formal agreement has been reached.

This riverfront project is part of a broader effort to revitalize New Orleans’ downtown riverfront from industrial use to pedestrian-friendly spaces. This effort began approximately fifty years ago with the development of Woldenberg Park and the Moonwalk promenade, enhancing the accessibility and enjoyment of the riverfront for both residents and visitors.

Originally, the site’s development plans included more commercialized elements, such as a Ferris wheel and amphitheater. However, following feedback from local communities, the plans have been revised to prioritize open green spaces and public amenities, garnering widespread approval from the neighborhoods affected.

As the city prepares to showcase these new developments by the next year’s Super Bowl, the project represents a significant investment in public spaces and urban greenery, aiming to provide residents and visitors with a continuous, scenic stretch along the Mississippi River, enhancing New Orleans’ unique landscape and cultural heritage.

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