What is an HOA and What are The Advantages?

Homeowners Associations (HOAs) have grown in popularity over the years. An HOA provides services to homeowners that will assist them in maintaining their home and the community they live in. Homeowners Associations are responsible for setting the homeowners association fees, providing the services and amenities, setting rules and regulations, and collecting fees.

Those purchasing a newly built home often appreciate the security of participating in a community that is held to various standards. These standards may include the number of pets allowed in a home, noise restrictions, overall home and yard appearance, and others. Other advantages of living in a community that offers an HOA include access to parks, clubhouses, and community amenities. Not only do these amenities provide a source of entertainment, they also promote a close-knit community vibe and socialization among neighbors.

Advantages of an HOA

While some, at first glance, might feel that HOA rules are restrictive, they are quite successful in keeping harmony and balance in a neighborhood.

Enhancing & Protecting Home Values

Homeowners are invested in their homes, and it’s important for that investment to be maintained. An HOA may outline rules that regulate various standards regarding landscaping, lawns, and home exteriors.

Upholding the Aesthetics in the Neighborhood

Yes, beauty is in the eye of the beholder, however, HOAs ensure that homeowners won’t be “graced” with potentially unnerving and shocking decorations and home designs. Outrageous exterior paint colors and excessive holiday décor may all be effectively curbed by HOA rules that strive to uphold modest and tasteful community aesthetics.

Various Home Maintenance Services for Homeowners

Depending on the HOA’s rules, the fee that homeowners pay may contribute to services that make life easier for those living in the neighborhood. Snow removal, leaf removal, spring cleanup, etc. are just a few examples.

Homeowner Involvement in Their Community

On its own, homeownership creates a sense of responsibility. A neighborhood HOA may also allow homeowners to serve on their HOA board, which gives members of the community a say in how their neighborhood is managed and how they, and others are served.

An Arbitration Process for Resolving Disputes

It doesn’t happen often, but there are times when neighbors don’t agree with one another. The presence of an HOA gives homeowners an avenue to resolve disputes so they can keep their complaints from escalating.

HOA Members Share in the Costs

Another advantage to having an HOA is that all of the members will contribute to share in the cost of the various services that are provided. Instead of paying independently for snow removal or landscaping, HOA members share in this jointly and receive the same services that benefit the entire community.

Common HOA Rules

When you purchase a home in a neighborhood that has an HOA, you agree to become a member of that HOA. Be sure to read through the conditions, covenants, restrictions and bylaws that are outlined in the HOA’s governing documents. Some common HOA rules include:

  • Limits to home occupancy
  • Restrictions on lawn and holiday decorations
  • Short-term rental restrictions
  • Trash & recycling rules
  • Controls over architectural design and additions
  • Noise complaint policies
  • Limits to the number of pets
  • Parking guidelines and rules
  • Home maintenance standards
  • Rules regarding food, drink and number of people in a common space
  • Pool area restrictions
  • How the home can be used (using it as a business)
  • Landscaping rules such as where plants and trees may be planted, and how large they can be

Are HOA Rules Ever Changed?

The beauty of an HOA is that it allows members to be directly involved in their community. If there is a particular rule that one or more members aren’t happy about, they have the power to bring about change when they go through the correct channels. Becoming a member of the board and/or attending board meetings are great ways to monitor rules and bring about change when necessary.

HOAs offer homeowners a number of advantages, and it is important to carefully review the rules and regulations before purchasing a home in Montana. Many homeowners appreciate the advantages an HOA brings through community involvement, dispute resolution, protecting home values, and sharing the cost of common services and resources.

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The Ultimate Guide to Summer Festivals & Events in Bozeman & Belgrade MT

Summer is just around the corner! And with it comes a wealth of exciting festivals and events in the Bozeman and Belgrade areas of Montana. Whether you’re a music lover, foodie, or outdoor enthusiast, there is something for everyone to enjoy. To help you plan your summer activities, we’ve put together a list of some of the best festivals and events happening in the area this year.

Sweet Pea Festival – August 4th-6th 2023

The Sweet Pea Festival is one of Bozeman’s most beloved summer traditions, celebrating the arts and culture of the community. This three-day festival is celebrating its 46th year and features live music, theater performances, art exhibits, food vendors, and more. It’s a great opportunity to experience the creativity and diversity of the Bozeman community, and a perfect way to spend a summer weekend with friends and family.

Bozeman Stampede – August 10th-12th 2023

If you’re a fan of rodeo, the Bozeman Stampede is the event for you. This three-day rodeo features some of the best cowboys and cowgirls in the country, competing in events like bull riding, barrel racing, and steer wrestling. There will also be live music, food vendors, and other entertainment throughout the weekend. Tickets go on sale June 1st for the 13th annual Bozeman Stampede Rodeo to take place at the Gallatin County Fairgrounds.

Music on Main – Thursdays starting July 6th through August 10th 2023

Music on Main is a summer concert series that takes place in downtown Bozeman every Thursday evening throughout the summer. The FREE concerts feature a variety of musical genres from rock to country to jazz. Bring your dancing shoes and enjoy the music, food vendors, and lively atmosphere!

Rockin’ the Rivers – August 10th-12th  2023

Just 30 miles west of Bozeman, situated at The Bridge Near Three Forks, get ready for a rockin’ concert series taking place in August. An amazingly talented collection of influential rock groups are booked to play against the stunning Montana landscape. You’ll want to stay for artists such as Tantric, Tim Montana, Orianthi, and Memphis May Fire.

27th Annual Madison Valley Arts Festival – July 29th 2023

An hour’s drive southwest of Bozeman you’ll find the 27th Annual Madison Valley Arts Festival taking place in late July. With 60 juried artist booths, delicious local food, live music, and fun children’s activities, you’ll want to bring the entire family to this one day event. There is also a raffle to help raise money for the Madison Valley Public Library, Madison County Fair Art Awards, Shakespeare in the Schools, and other community programs.

Montana Shakespeare in the Parks – Various dates and locations

Montana Shakespeare in the Parks is a traveling theater company that performs in communities throughout Montana during the summer months. The company presents free outdoor performances of Shakespearean plays, as well as other classic and contemporary works. It’s a wonderful opportunity to experience live theater in the great outdoors, and to enjoy some of the best acting talent in the region. 2023 brings performances of Shakespeare’s Measure for Measure and Alexandre Dumas’ The Three Musketeers to life. Grab your ticket and take your seat and enjoy some truly spectacular shows.

Summer SLAM Festival – August 5th-6th

Taking place in the heart of Bozeman at Bogert Park, the Summer SLAM Festival is a treat for everyone. Get ready for live music and performances, an enticing food court, an artist’s market and demonstrations, and family friendly activities such as dancing, yoga classes, and improv comedy routines.

Summer Art Walks 2023

Every second Friday of the month from June through September from 6-8PM, citizens are invited to attend the Downtown Bozeman Art Walks. Various businesses in the downtown district participate by featuring local artists, hors d’ouevers, and complimentary refreshments. It’s an opportunity to enjoy a stroll through downtown as well as patronize local businesses and support local art. 

These are just a few of the many festivals and events happening in the Bozeman and Belgrade areas this summer. Whether you’re a longtime resident or a first-time visitor, there is always something new and exciting to discover in this beautiful part of Montana. So, mark your calendars, grab your friends and family, and get moving!

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How Your Credit Score Affects Your Home Buying Leverage and What You Can Do About It

Buying a home is by far one of the greatest American dreams. And why wouldn’t it be? The opportunity to own your own home and maintain a quality standard of living for you and your family is a fulfilling venture. Homes in Montana, particularly Bozeman and surrounding areas like Belgrade, are of keen interest to those who are looking for a great job market and excellent quality of living, making it an ideal location to put down roots. So, in preparing to make your homebuying purchase, your credit score will be very important. Let’s take a look at how you can maintain and improve your credit score.

Aim for as High a Credit Score as Possible

If you are thinking of buying a new home, one of the most important aspects of the process is the health of your credit score. It is one of the very first things that mortgage lenders consider when you apply for a loan. The higher your number is (between 300 and 850), the better your chances will be that the lender will consider you a “good risk.”

While a score lower than 700 may not directly hinder your chances of getting a loan, it could create less than favorable terms for you when it comes to interest rates. The lower your credit score, the higher the loan interest rate is likely to be.

Interest rates equate to the total mortgage monthly cost, and the higher the rate you ultimately secure, the more dollars you will be accountable for. Therefore, if you have a higher credit score and are able to lock in a lower interest rate, your money will take you further.

Factors Included in Your Credit Score

There are a few factors lenders will look at to determine your ‘creditworthiness.’ These 5 factors are used to help calculate your credit (or FICO®) score.

  • The Length of Your Credit History. Lenders like to see that you have been able to maintain your lines of credit for a significant period of time. Your credit history makes up 15% of your FICO® score and it includes both the ages of your newest and oldest accounts.
  • Your Payment History.  Lenders can determine the likelihood of you paying back your debt to them by looking at your credit history. Even one missed payment can have a negative impact on your credit score. This factor accounts for 35% of your score.
  • How Much Credit You Are Using. Using more than 30% of your available credit is considered a negative to lenders and creditors. Therefore, you should aim to use less than 30% of your credit availability. Credit utilization accounts for 30% of your score.
  • Your Credit Mix. Lenders look well upon those who have a mixed credit portfolio. They might have a student loan, mortgage, car loan, as well as credit cards. Being able to successfully manage all of these shows lenders how well you are able to manage your credit. This element accounts for 10%.
  • Your New Credit. If you are actively acquiring new credit and/or lenders are making hard inquiries into your credit report, this could impact your score negatively as this often indicates increased risk. New credit and new credit inquiries account for 10% of your total score.

What You Can Do to Improve Your Credit Score

Avoid new credit applications. Applying for additional credit cards right before or during the process of trying to secure a mortgage can lower your score. Wait until after you have the loan to apply for more credit.

Pay your bills on time. Your credit report reveals if you pay your bills on time. Making payments on-time will keep your credit score attractive, which in turn will attract lender interest.

Check your credit report. Whether or not you suspect your credit score is accurate, it’s always a good idea to check your credit report for errors. These errors can negatively impact your score and you’ll want to take steps to correct them. Various credit report websites will also reveal what’s holding you back from raising your score.

Pay down debt. Lenders will look at how much debt you carry compared to your income. Knowing this, it’s a great idea to start working on lowering your debt before applying for a mortgage.

If you are interested in moving your family into one of the many beautiful Prescott Ranch homes for sale, your first step toward obtaining that home is to keep an eye on your credit score and take action to get your score as attractive as possible.

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Getting Your Finances Ready to Buy a New Home

Buying a new home takes planning, research, and patience. Not only are you considering the possibility of a new location, new schools, new employment, etc. you also need to consider the state of your finances. Is there room for improvement in this area? Have you saved up enough for a down payment? Now is a great time to figure out exactly what you need to improve and adjust so you can buy the home of your dreams.

What Do Lenders Consider When You Apply for a Home Loan?

During the process of obtaining and applying for a home loan, the lender will use various methods to determine if you are able to pay them back. They will want to see if you have enough cash to cover the down payment, if you have a steady income, and if you’re also able to cover the eventual costs of taxes, closing costs, and other fees. Your investments, bank activity, and other elements of your financial life will all be scrutinized.

They look at your banking and credit to see if you have a history of paying off debts, and they look at how much debt you have. This in-depth survey of your overall financial situation is so that they can best decide if you are a good candidate for a home loan.

How can I keep good credit or improve my credit?

Use Less Available Credit

Many credit experts say you should keep your credit utilization ratio — the percentage of how much credit is available to you and how much debt you have taken on — below 30% to maintain a good or excellent credit score. This is a good rule of thumb but the lower your credit utilization ratio, the higher the chance the lender will look at your application favorably. The less credit you use from what is available to you is a good indication that you are living within your means. 

Obtaining the highest possible credit score is important so lenders will offer you a good percentage rate on the loan. The higher the credit score, the lower the rate offered which can amount to tens of thousands of dollars saved over the life of the loan.

Pay Bills On Time

Credit scores are an accurate reflection of how well you are at maintaining consistency with paying your bills on time. If you miss even one payment, it can take a toll on your credit rating. Whether you want to get back on track or stay on track to buy a newly built home, pay your bills when they are due.

Avoid Opening New Lines of Credit

When you apply for a credit card or loan, the lender makes a hard credit inquiry into your finances. This can have an (although temporary) negative effect on your credit scores. In addition, having a mix of different types of credit accounts is looked upon more favorably by lenders, so try and have that established before the loan process.

Save For Your Down Payment

Being able to put down 20% or more for the down payment of your home is truly ideal – you will more likely be able to secure a loan and avoid having to pay PMI (private mortgage insurance). 20% down gives you a goal to work with while you are in the process of moving to Montana. The bigger the down payment, the less money you will have to borrow and the lower your mortgage will be. Plus, you’ll likely get a lower interest rate and will pay less for your home overall.

Manage Your DTI

Your debt-to-income ratio is very important to lenders, and if your DTI is over 43% you run the risk of not getting approved. The best way to lower your DTI is by paying down your existing debt. It is recommended to start with the smallest debt first and work your way up. This approach will give you  a sense of completion and the ability to move forward and conquer other debts. 

Another way to overcome debt is by tackling the highest interest loans, though those might take longer to pay off than the smaller debts. Whichever method works best for you will help you lower your DTI and put you in a better position for home ownership.

Set a Budget You Can Afford

If you want to know ahead of time how much you can afford, consider going through the process of getting pre-approved for a mortgage. Remember, this number reflects what you can afford but it doesn’t necessarily take into account your comfort level. You will also have closing costs to pay, moving costs, home furnishings, etc. 

If you are considering moving to Montana, work on paying down your high-interest debts, lowering your DTI, and staying within your budget so you and your family can enjoy a newly built home and all the amenities the home – and Montana – have to offer.

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Millennials are Reshaping Luxury Home Buying 

Millennials Know What They Want

As the first generation to enter adulthood during the internet age, millennials are ready – and know what they want – in their first home purchase. Comprising more than 20% of the American population, those in their 20’s and 30’s have researched what is available, what is affordable, and the amenities that they desire to fit their lifestyle. 

Luxury Prescott Homes for Sale

The beauty of moving to Montana is the intertwining of luxury both inside and out. The homes available at Prescott Ranch are designed for those who value the ability to customize their needs with contemporary designs that reflect both modern and traditional features. Millennials appreciate that the luxurious Prescott homes for sale include all of the amenities they find necessary: lavish great rooms, functional mud rooms, and multiple seating areas that are combined with the magnificence of living in a mountainous region that is a feast not only for the eyes but also for the soul.

The Finest Selection of Newly Built Homes

With three series of new homes available – the Morgan Series, Appaloosa Series, and Lusitano Series, it is easy to find the right size and floorplan to meet the needs of any individual, couple, or family. 

Ranging in square footage from just 1,761 to over 3,500 it is easy to see how the plans in each series have brought luxury conceptualization to lavish and affordable reality. These open concept homes are designed with the idea of melding attractive architectural motifs with traditional nuances to promote healthy and productive living spaces.

Raising a Family in the Right Location

Moving to a new location requires families to peer five, ten, or even twenty years down the road. What will they be requiring as those years unfold? This new generation of homebuyers desire excellent school systems for their children, outstanding career opportunities for themselves, a deep rooted sense of community, and access to unparalleled outdoor recreation. Prescott Ranch offers all of these and more. 

Belgrade, Montana gives millennial homebuyers the opportunity to be a part of close-knit communities, top-rated Montana schools, and front door access to majestic mountain peaks on all sides that include the Bridger Mountains, Gallatin Mountains, and Spanish Peaks. World renowned skiing, fishing, canoeing, camping, and more are all within reach from Belgrade, Montana as a day or weekend trip. Millennial parents know the importance of raising children with fresh air and natural surroundings, and the newly built homes in Montana create this rich opportunity.

The Freedom of an Upcountry Lifestyle Just Minutes from the Convenience of Bozeman

As millennials transition to the role of homeowner and glean the many benefits of a residential lifestyle they may still want the accessibility offered by larger city such as Bozeman. Just 15 minutes down the road, Bozeman has a number of bistros, breweries, restaurants, art galleries, boutiques, and a fun nightlife. 

As this generation embarks on the next journey in their lives, the newly built homes at Prescott Ranch in Belgrade are well-equipped to provide them with all of the amenities they prefer, amid a splendid and breathtaking backdrop that only Montana can offer.  

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Moving Out of State? Top 10 Things to Keep in Mind

Each year hundreds of thousands of people move to a new state in search of a new job, new environment, or new life. Moving to Montana has become more popular in recent years. The idea of moving to another location can spark a lot of exhilaration and excitement. It can also feel a bit overwhelming, so here are 10 things you should keep in mind before and during the big move. 

  1. Plan for the Big Day. While moving day might still be far off into the future, it helps to visualize the actual moving day to get an idea of what it looks like. Will you be packing and moving yourself or will you be hiring movers? Will you be asking friends to help you pack and move or will the movers do all the packing for you? Does your employer have the facilities to help you with the moving process? Getting an idea of whether you’ll be hiring professional movers or doing it all yourself will help you determine how much money to save for the moving process.

  2. Decide What to Do with Your Belongings. If you are moving from one home to another, chances are high you have a long inventory list of belongings. Moving from one state to another is going to be expensive, so now is the time to take inventory and decide what you will keep, donate, or throw away. Consider holding a yard sale for large items like furniture and listing other items on selling platforms. When donating, remember that you can claim the deduction on next year’s taxes.

  3. Pack Ahead of Time. When you give yourself the time to do things, you won’t be rushed and are less likely to be stressed and make mistakes. If you’re able to start a month prior to the moving day, this should give you enough time to start with the items you use less frequently, on up to what you use most often. Clearly label each box with the room where they belong, as well as a written list of the contents on top.

  4. Revamp Your Budget. Let’s face it; moving to another state can be expensive. If you’re concerned about money being a little bit tight, there are ways to ease the financial burden. Schedule your moving day for one that has lower moving cost estimates, use recycled packing materials, and do as much of the work you can comfortably do yourself. Reroute some of the money you might be spending on eating out toward your moving fund.

  5. Call Utility Companies Before You Arrive. Utilities are often what runs in the background of our lives and aren’t thought about unless something goes wrong. The last thing you want is to arrive in your new home and not have basic services such as gas and electric, internet access, trash pickup, sewer, etc. This is also the time to find out if there will be a gap in service. If you expect to arrive with certain (or all) of the utilities not yet working, you can plan ahead of time for that inconvenience.

  6. Consider Shipping Your Car. If you are moving to Montana but don’t plan on driving your car there, you’ll need to arrange for it to be shipped to your new home. It can take up to two weeks for your car to arrive, so plan on renting a car, taking public transportation or using a ride-share service for the first several days you have arrived at your new place.

  7. Research Your New City. Each state and each city is different; they are governed by different laws and requirements. You’ll want to find out about the schools your children will be attending, when they require registration, and what forms need to be filed. If you are a pet owner, research the veterinary clinics in the area and you can also discover new job opportunities as well as entertainment venues and even dining options.

  8. Be Patient. Moving is one of life’s most exciting – and challenging – events. With so many different elements working together, you’re bound to experience one of them falling out of synch. The movers might be late, a prized possession accidentally broke, or your vehicle doesn’t arrive on time. Manage your expectations by going into the moving process with an abundance of patience.

  9. License & Registration. If you are moving to Montana from out of state, you are required to update your license and registration information. Go online to see the exact guidelines for your municipality.

  10. Keep a Ready-to-go-Bag. Amid the hustle and bustle of a move, the last thing you want is to dig through endless boxes looking for something you use and need all the time. Keep all of your necessary items (including documents you need for the move) in a ready-to-go-bag so they are never far from sight.

A growing interest in outdoor recreation, and people searching for a better quality of life have all contributed. According to California Movers USA, In 2021, Montana had the highest net inflow of moves per capita, with 73% of moves inbound.” Prescott Ranch has become a destination neighborhood in Montana for those looking to enjoy the creature comforts and luxury of home while still living in amid a natural, rural environment.

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Stay Organized with This Essential Moving Checklist

Moving into a newly built home is one of the most exciting times of anyone’s life. It is a chance to put down roots and make a space truly your own. Since there is so much to do in the process of moving from one location to another, it is a great idea to have a checklist so you can make certain you are properly prepared and organized for this momentous occasion.

Utility Set Up

There are basics that everyone requires, and you will want to make sure that the essential utilities are already set up when you move into your new home. You will also want to be sure you have stopped the service of the utilities in your name at the location you are leaving. These include:

  • Oil/Gas/Electric
  • Security System
  • Cable/Phone/Internet
  • Water/Sewer
  • Garbage Pickup/Recycling

Get Acquainted with Your Child’s New School

One of the reasons you are moving to Montana may be for the nationally recognized, top-rated school system. However, there are still some items to check off your list before your child’s first day. 

  • Let their previous school know that your child will be transferring to -so they can send their transcript.
  • Provide the required Proof of Residency or other required paperwork to your new school in order to enroll. This may look different at each school, so check with the school first to see exactly what documentation is needed.
  • Request or make a portfolio of your child’s work to take to the new school.
  • Bring your child to the new school for a tour. Make it fun to get acquainted with the campus and facilities.
  • Download or contact the schools for the current academic calendar. Research family-friendly activities from sports teams and social clubs to summer camps and outdoor attractions. 
  • Meet with your child’s new principal, teacher or year coordinator. You might like to set up a review meeting, even within the first 1-2 weeks, to see how things are going.

Find the Right Moving Company

If there’s ever a time you want to hire professionals, it’s when you’re moving. They will be handling all of your furniture and fragile possessions so you want to make certain that they will get the job done on time and without incident. 

  • Check company reviews to see other customer’s’ experience with the company.
  • How do they charge? Some companies charge one flat rate (which would be ideal for moves from one state to another) and some charge an hourly rate.
  • Confirm that they are bonded and insured.
  • If you are paying per hour, consider doing some of the work yourself such as disassembling furniture and packing boxes.

Box it Up!

It might feel like your life is all about boxes right now – but once you’re in your newly built home you’ll enjoy unpacking them and making the place your own. When it’s time to gather boxes for the move keep this in mind:

  • You can obtain general boxes from places such as hardware stores, liquor stores (which are ideal for small, fragile items because they have convenient cardboard separators inside of them), grocery stores and big box stores.
  • Ask the moving company you’ve hired for any specialty boxes you may need to move things like pictures and clothing.

If you do the packing yourself, there is an efficient and streamline process to follow:

  • Pack up one room at a time, don’t move to the next until the current room is complete.
  • Label each box boldly or with colors so it is very clear to you and the movers where each box should go.
  • On top of the items you pack in each box, place a list of what is inside. This provides an easy peek into the box without having to dig through it. 
  • Mark “Start Here” on the boxes you want to unload first. This might be items for the kitchen or toiletry items.
  • Wrap fragile items in bubble wrap and newspaper. You should pack any fragile items that you can’t bear to lose.

Plan for Boxes Ahead of Time

Color coding your boxes in addition to boldly labeling them will be helpful to movers when they unpack the boxes and load them in your new home. Tape a piece of paper that is the same color as the coded boxes to specify what goes where. This eliminates confusion when you have more than one family gathering room such as a great room and a dining room, as it may be difficult to differentiate when there is not yet any furniture in place.

Ask the movers to start with the “Start Here” boxes by putting them in easily accessible locations. 

Have an idea of where each piece of furniture will go so movers can place them exactly or roughly in that visualized space.

At the end of this process, you can start to enjoy making memories in your new home at Prescott Ranch in Belgrade. 

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What You Need to Know about FHA Mortgages

In March 2023, the Federal Housing Administration (FHA) instituted a 30 basis point reduction to the mortgage insurance premiums (MIP) charged to homebuyers who will obtain an FHA-insured mortgage with a 3.5% down payment. This could mean savings in the thousands to many first-time homebuyers. So what is an FHA loan and how do they work? Let’s take a look.

What is an FHA Mortgage?

FHA stands for Federal Housing Administration. An FHA loan is a mortgage that is backed by the government, specifically the Federal Housing Administration. They are especially popular among first-time homebuyers because they often require lower down payments and lower minimum credit scores to qualify. You do not, however, need to be buying your first home to qualify for this type of loan. Due to the greater convenience and availability for homeowners to obtain an FHA mortgage, interest rates may be a bit higher than conventional loans.

How Does an FHA Mortgage Work?

An FHA mortgage can be obtained for those interested in purchasing a multitude of properties including single family homes and multifamily properties. The government insures these loans, but they are underwritten by third-party lenders already approved by the FHA. The homebuyer has the choice of a 15 or 30-year term loan with a fixed or adjustable interest rate. 

One thing to keep in mind is that every borrower must also pay FHA mortgage insurance. This insurance protects the lender from loss if the borrower defaults on the loan. Most mortgage loans require mortgage insurance if the borrower’s down payment on the home is less than 20%. There are two premiums the borrower must pay:

  • Upfront Mortgage Insurance Premium. This is a small percentage of the loan amount that can be rolled out over the term of the loan.
  • Annual Mortgage Insurance Premiums. Factors to determine this amount are whether the loan is a 15 or 30 year term loan and the LTV (loan to value ratio). This premium is divided by 12 and paid monthly.

Borrowers who finance 90% or less of the property’s value will often see their mortgage insurance premiums cancelled after 11 years if they stay current on their monthly mortgage payments.

Closing costs are limited to 3-5% of the loan amount. The FHA does allow up to 6% of the home buyer’s closing costs to be covered by lenders, sellers, and builders. 

Benefits & Considerations

If you believe that an FHA mortgage might be a good fit for you, start now by saving for your down payment and researching potential lenders.

Benefits

  • As long as you meet FHA requirements, the FHA does permit you to get down payment assistance and financial gifts. There are many conventional loans that don’t allow for this.
  • It’s possible to obtain an FHA loan even with a down payment as low as 3.5%, as long as your credit score is 600 or so minimum.
  • On occasion, the FHA does permit individuals with credit scores as low as 500 to obtain a loan. This can be particularly helpful if your credit history is weak.
  • FHA allows sellers to pay up to 6% of the closing costs. Many conventional lenders put a cap of 3% on the seller’s contribution. 

 Considerations

  • The FHA has loan limits on how much you can borrow. This is established by the median home prices in the metro area and surrounding counties. Because home costs are always changing, these loan limits change as well. 
  • If you have good credit, there are other options to consider even if you don’t have a lot of money for a down payment on the home. FHA mortgage premiums may be higher in some instances than private mortgage insurance, which you will still be required to pay if you don’t put down 20%. 
  • Even though the mortgage insurance premiums can be rolled out into your loan, they can still be a bit costly.

Requirements and Qualifications

You must meet some requirements to qualify for an FHA loan including:

  • Minimum credit score. The lower your credit score the more you will need for a down payment. Generally, a 580 score will require a down payment of 3.5%. A score of 500 may require 10%.
  • Debt to income ratio. The total of your monthly debts cannot be more than 43% of your gross income. 
  • Your potential lender will look very closely at your income, credit and the value of the home you want to purchase.
  • You must plan to buy a home with between one and four units while also planning to use it as your primary residence.

Keep in mind that there are alternatives to FHA mortgages including a USDA loan, conventional loan and VA loan, each with their own set of standards and qualifications. Overall, FHA mortgages are a great way for many people to be able to purchase a home. The standards to qualify are not terribly high, and they are forgiving for people who might not have stellar credit histories. 

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10 Tips to Find Your Best Mortgage Rate

Whether you are moving to Montana and buying your first home or have gone through the process half a dozen times before, the journey toward buying a home is always different. A few years ago, it was relatively easy for most to secure a modest mortgage rate. Now, with rates changing and edging higher, there are still ways to secure the very best one you possibly can.

  1. Keep an Eye on Your Credit Score. One of the first documents your lender will look at is your credit score. Obtain a copy of your credit report and review it carefully so you can point out any errors (yes, it does happen) and also so you can know exactly what outstanding balances need to be reined in.
  2. Save for a Larger Down Payment. The rule of thumb for a down payment on a home is to have 20%. However, a 20% down payment is only necessary if you don’t want to take on the mortgage insurance requirement. Your down payment will depend on the type of loan you are getting, and for a conventional loan you will be required to put down 3%. VA loans and USDA loans require no down payment if you are eligible for them.
  3. Pay off Your Debt. One thing lenders look at is your debt-to-income ratio. If you are carrying a heavy load of debt in comparison to your income, you will be looked at as risky when it comes to financing a home. It might be difficult to determine if you should pay down debt or use that money to save for your down payment. Choosing to pay down high interest credit cards will help put you in a low DTI ratio which is more attractive to lenders.
  4. Decide Between Fixed & Adjusted. Choosing between a fixed rate mortgage and an adjustable rate mortgage has a big impact on how much you will pay over the life of the loan. A fixed rate offers the peace of mind of knowing exactly what your payment will be month to month. An adjustable rate allows for dips – but also peaks – in the market. ARM’s typically remain fixed for a number of years before they are subject to market fluctuations.
  5. Work to Actively Improve Your Credit Score. Since lenders use your credit score as a litmus test toward how well you will handle your future payments and debts, it’s important to work proactively and improve that number. By making timely payments on your credit cards, your home, your car, etc., your credit score should improve.
  6. Opt for a Shorter Term Loan. When all is said and done and that final mortgage payment has been paid, the borrower will have paid a considerable amount of money over the actual purchase price. Shortening the term of the loan will help you secure a lower interest rate and it will help to pay off your home in Montana more quickly, by more rapidly building equity.
  7. Raise Your Income. While you are whittling down your debts to improve your debt-to-income ratio, you can also attack the process from the other side. Focus on how you can maximize your income. Perhaps it’s asking for a raise at work, taking on a side gig or starting your search for a higher paying job. 
  8. Increase Your Down Payment. When you significantly lower your LTV (loan-to-value ratio) you are seen by lenders as a good risk and may then obtain a more favorable mortgage rate. The more you put down on your home, the less the lender will need to give you. Keep in mind that you don’t want to spend your last dime on your down payment; it’s wise to have a 3-month cushion to cover unforeseen expenses.
  9. Prepay Mortgage Points. Also called discount points, when you’re able to pay 1% of the loan amount, it is considered one point. You can also purchase these points in increments down to .125 points. When you pay these in advance, you lower your interest rate. If you plan to stay in your home long enough to break even, it’s a great way to save money.
  10. Bide Your Time. The idea of moving to Montana and into your dream home will require patience and planning. So, when you let yourself sit back and watch the market, you will be in a better position to find the lowest interest rates available and get the most bang for your buck.
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A Comprehensive Guide to 1031 Exchanges

Are you interested in reinvesting your capital gains tax instead of paying it out? A 1031 exchange may work for you.

Put simply, a 1031 tax exchange allows for the investor to defer capital gains tax, which then results in more capital to invest in a substitution property. Normally, when an investor sells a property they must pay a portion of the sale in capital gains – both federal and state taxes. A 1031 exchange allows the investor to waive capital gains (for now) and instead invest in a replacement property.

Not only does this let real estate investors defer capital gains tax while buying and selling property, it also gives them access to exciting new investment strategies.

The IRS code dictates that the exchange must be done with “like-kind” properties, there are strict timelines to adhere to, and there must be a qualified intermediary involved in the transaction.

Investors looking for homes in Montana to lease out will find a number of attractive, newly built homes in the Belgrade area that will qualify as replacement properties to take financial advantage of the 1031 exchange. 

Why is it Called a 1031 Exchange?

Within Section 1031 of the IRS Code, you’ll find the essentials necessary for a successful property exchange. This exchange is recognized by the IRS as a means of deferring capital gain taxes.

Properties Eligible for 1031 Exchange

Not every property is eligible for this type of exchange; however, a number of properties are which means investors have more purchasing power than they may realize.

  • Single-family rental homes
  • Multifamily rental homes
  • Motels & hotels
  • Raw land
  • Offices & commercial properties
  • Farms & Ranches
  • Leasehold interests of 30+ years
  • Rental ski condo for a 3-unit apartment building

There are other eligible properties and to get more information, contact your tax advisor if you are interested in this type of exchange.

What Exactly Is a “Like Kind” Property?

Although this term is not specifically defined in the IRS tax code, professionals do have a definition for it. Any kind of real property that is held for productive use as in an investment, business, or trade may be considered like-kind property.

The kinds of property that can be exchanged in a 1031 transaction are very broad. For example, a single-family rental property may be exchanged for a duplex (or more), a shopping center, raw land, or even an office for apartments.

Any property that’s been relinquished that was held in investment will be in like kind with property with the intent to be held in investment.

Properties Not Eligible for 1031 Exchange

The main idea behind what might be eligible for a 1031 exchange and what isn’t, is the intent to which you purchased the property, and your intent for the exchanged property. Both sides of the equation must be that they are held in investment, so personal residences and partnership interests do not apply.

  • Real estate investment trusts (REITs)
  • Stocks, notes, or bonds
  • Personal residences
  • Flips for resale (though there is a possible way around this – if you flip and then rent for a period of time, it may be eligible after a certain time period, likely a year, for the 1031 exchange, check with your tax advisor).
  • New Construction

Tax Benefits with a 1031 Exchange

Reset Depreciation

The IRS allows owners of real estate to depreciate their assets. After 27.5 years, investments may be depreciated due to deteriorating conditions over time. After reinvestment is made into a new property, the depreciation schedule is reset.

Fewer Taxes

Investors can reduce the taxes they pay by exchanging property in a state that imposes income taxes with an investment opportunity in a state that does not have an income tax. Some states that do not have income tax include Nevada, Texas, Florida, Wyoming, and Alaska.

Deferred Capital Gains

This benefit is one of the primary reasons investors make a 1031 exchange. It allows the deferring of the capital gains tax upon the selling of a property until they cash out. There are no limits on how often this can be done, and for many investors, it’s a lucrative way to continually leverage their financial position.

Important 1031 Exchange Vocabulary

Relinquished Property refers to the property that the investor will be selling. It must be an investment or business property and not a vacation home or primary residence.

Replacement Property refers to the property that is to replace the relinquished property. It must be of equal or greater value and “like kind” to the relinquished property.

A qualified Intermediary refers to the person or the company that holds the real estate sale proceeds and subsequently facilitates the exchange. This person or company holds the exchange funds because IRS tax law dictates the seller of the property cannot or the funds will be subject to tax liability. The qualified intermediary can’t have any other formal relationship with the seller and must be a licensed professional. Overall, a 1031 exchange lets the investor reinvest the money that would normally be paid out to capital gains tax and put it into a replacement property.

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