Intercontinental Exchange (ICE) completed its acquisition of Black Knight in a $11.9 billion deal that dragged on more than a year due to antitrust concerns. It’s now easily the biggest player in the mortgage tech space.
“Since our founding over 20 years ago, ICE has steadfastly adhered to our founding principle, demonstrated throughout our history, that applying technological innovation and digitization to traditionally analog businesses can make markets more efficient and transparent for all participants,” Jeffrey Sprecher, ICE’s founder, chair and CEO, said in a statement.
“Our team is well-positioned and ready to apply our proven playbook across the U.S. mortgage ecosystem to help improve the homeownership experience for millions of American families.”
“The aggregate implied value of the Merger Consideration payable to the former holders of Black Knight Common Stock pursuant to the Merger was approximately $11.9 billion, including approximately $10.5 billion in cash and approximately 10.9 million shares of ICE Common Stock,” according to ICE’s 8-K filing with the Securities Exchange Commission (SEC) on Monday.
As agreed to by the Federal Trade Commission(FTC) last month, ICE and Black Knight will complete the divestiture of Black Knight’s loan origination system (LOS) Empower business and product and pricing engine unit Optimal Blue to a subsidiary of Constellation Software Inc. within 20 days after the acquisition.
ICE plans to hold a conference call with investors to discuss the acquisition on Sept. 28.
FTC accepted a binding settlement that both firms will divest Black Knight’s two businesses, settling FTC charges in March that ICE’s deal with Black Knight, which combines the two top mortgage technology providers, would drive up costs, reduce innovation and limit lenders’ choices for mortgage origination tools.
Under the agreement, ICE and Black Knight are required to seek approval from the FTC before acquiring any other businesses related to LOS or PPE for the next 10 years.
Both firms are prohibited from enforcing any non compete or non-solicit provision or agreement against any employee who seeks or obtains a position in the divested businesses.
Constellation would receive a license to resell with Empower certain other Black Knight mortgage-related products and services that would be acquired by ICE. A monitor will be appointed to oversee compliance with the proposed consent order.
ICE’s planned acquisition of Black Knight went through a bumpy road after the announcement was made in May 2022.
In addition to both firms’ decision to sell Empower and Optimal Blue to address antitrust concerns, ICE and Black Knight amended their deal terms to reduce the valuation of Black Knight to $11.8 billion from $13 billion.
The deal announcement between ICE and Black Knight also stirred up strong opposition from some lawmakers and the Community Home Lenders of America (CHLA), which claimed the merger would affect the pricing of mortgage loans and mortgage servicing rights, especially at a time when affordability is being challenged.
The Black Knight acquisition follows ICE’s 2020 acquisition of Ellie Mae, its 2019 acquisition of Simplifile, and its 2018 acquisition of Mortgage Electronic Registrations Systems (MERS), which together created the foundation of its ICE Mortgage Technology business segment.
Are fears real or imagined? Mortgage Professional America reached out to Chris Moschner (pictured), chief marketing officer at Finance of America, for a deeper dive into the survey’s findings. MPA started by asking: Is the collective level of high anxiety based on reality? Or are worries prompted by imagined threats? “Perception to some extent is … [Read more…]
July saw inflation rise once again, and interest rates are still rising. In fact, the average rate on credit cards is now nearly 21%, up from just 15% a little over a year ago. With these economic headwinds, you might find yourself in need of extra funds — to repair your home, to cover unexpected costs, or maybe just as a financial safety net.
Either way, if you’re a homeowner, you may think about tapping your home equity. Home equity loans and HELOCs both allow you to turn your equity into cash, which you can then use however you wish.
Is now a good time to do that, though? And what should you consider before tapping your home equity in today’s market? We asked experts for their opinion to help you decide.
Start by exploring your home equity loan options here to learn more.
Is home equity worth using now? Here’s what experts think
Thinking of using your home equity today? Here’s how the experts we spoke to recommend homeowners proceed.
Know what you’ll use it for
Tapping your home equity means putting your home at risk, so having a clear idea of what you need the money for is key before making a decision.
“Why do you need the money? Is it really necessary? Are you investing in your future or in something that strays away from your financial goals?” asks Jim Black, executive director of lender strategy at mortgage lender Calque. “Some things, like vacations, might not be the best reason.”
In short: Make sure the risk is worth it. Fixing the roof on your house or putting money into your business likely fall within that category. But pulling out equity to pay for new clothes or buy a new couch may not.
Using your home equity might also be smart if you’re eyeing a new home but currently have an ultra-low mortgage rate. In this scenario, selling your house and buying a new one would mean trading up for today’s 7%-plus rates. You might consider leveraging your equity and improving your existing house instead.
“Homeowners have the unique opportunity right now to tap into an incredible amount of home equity that’s built up over the past few years,” says Bill Banfield, executive vice president of capital markets at Rocket Mortgage. “They can use this cash to do home renovations and make their space better fit their life — without having to pick up and move to a new house.”
Get started with a home equity loan here now.
Weigh it against other options
You’ll also want to weigh all your options before turning to home equity. Depending on what you’re looking to pay for, you may be able to use a credit card, personal loan, student loan or one of many other financial products.
Typically, home equity loans and HELOCs are going to have lower rates than credit cards and personal loans, but they’re higher than rates you’d see on first mortgages and refinances. Because of this, it’s important to get quotes for several different products (and from different lenders) to ensure a home equity product is the most affordable path forward.
“Do you have other options?” Black asks. “Look at different ways to get the financing you want and compare them.”
If you do opt to tap your home equity, you should also compare your options within that realm. Home equity loans and HELOCs are the most commonly used products, but depending on your age, you may also consider a reverse mortgage (these are only for seniors). Home equity investments — which give you an upfront payment in exchange for part of your home’s future value — are an option, too.
“These provide funds upfront with no monthly payments or debt accrual, but in exchange for the some future value of your home — or its appreciation over time — or both,” says Sarah Dekin, president of Hometap, a home equity investment platform. “The potential disadvantage here, of course, is that you may miss out on some part of the future value of your home down the line when you settle.”
Think long term
Finally, think about your long-term financial picture before you tap your equity. Calculate the total cost of tapping your equity — the interest, closing costs, or lost appreciation you could see — and make sure those costs are worth it.
As Black puts it, “Banks are in the business of making interest, and this means you need to see the worst-case amount of equity you will be losing by borrowing. You also need to evaluate the cost of attaining the additional debt.”
Consider your employment and income prospects, too. Is your job stable? Do you expect your income to be the same or higher 10 years down the road? You want to be sure you can afford your payments not just now, but throughout your entire loan term (and some home equity loans are as long as 30 years).
Keep in mind that if you use a HELOC or another product with a variable rate, your payments could rise over time, too, so make sure you’ll have the capability to make those higher payments should they come about. If not, you could lose your home to foreclosure.
“The most important consideration is affordability,” says Adam Boyd, executive vice president of home equity, credit cards, and unsecured lending at Citizens Bank. “Since the borrower is using the home as collateral, it is critical they ensure they can afford the loan. If there’s any concern that rising rates will impact your ability to afford the loan in the future, it may not be the best option.”
Learn more about your home equity options here now.
Other home equity benefits to know
Home equity products can be smart tools when used in the right scenarios. They may be able to save you on interest compared to other loans and financing options, and they allow you to spread your costs out over many years. You may even get a tax deduction, depending on how you use the funds.
Just remember: Using your equity means putting your home on the line as collateral. If you’re not sure this is the right move for your finances — or you want help evaluating your full range of options — consider talking to a financial professional first. They can point you in the right direction.
The Ivy League is made up of eight elite private colleges, all of which are based in the Northeast. Being accepted to an Ivy League college is something some students work toward all their lives — but there’s more to gaining admission to these schools than good grades and a long list of extracurriculars.
With admission rates now hovering in the 3.4% to 5% range, there’s a heightened sense of competition among top students in high schools across the country and around the world.
Read on to learn more about Ivy League colleges, including which schools are considered “Ivies,” the benefits of going to an Ivy League college, how much they cost, and ways to make your application stand out.
What Are the Different Ivy League Schools?
Named for their ivy-covered campuses, the eight private colleges that make up the Ivy League have many things in common. However, each school has its own unique reputation and characteristics that attract different kinds of students. Here’s a closer look at these top-ranked schools. 💡 Quick Tip: You can fund your education with a low-rate, no-fee private student loan that covers all school-certified costs.
Brown University
Located in Providence, Rhode Island, Brown is known for its humanities programs as well as its Warren Alpert Medical School. Its open curriculum allows for a relatively free-form educational model where students are encouraged to take classes they like without having to accumulate certain requirements. Brown also gives students the option of taking as many classes as they want on the basis of pass-fail.
Columbia University
Located in New York City, Columbia is one of the most diverse Ivy League schools with 46% of undergraduates identifying as students of color. It also has one of the highest percentages of international students at any Ivy League, with 13% of its student body coming from foreign countries. This cosmopolitan college is host to renowned business, journalism, and law schools, and requires students to adhere to its core curriculum, which focuses largely on liberal arts.
Cornell University
Located in Ithaca, New York, Cornell is one of the largest Ivy League universities, occupying a sprawling campus in this scenic upstate town. Known for its agriculture and engineering schools, Cornell also has strong Greek life and a wide range of athletic programs.
Dartmouth College
Located in Hanover, New Hampshire, Dartmouth is the most rural of the Ivies, drawing a student body interested in the outdoors and Greek life — around 60% of students participate in sororities or fraternities. Its somewhat smaller student body allows for more one-on-one attention in classes and a strong sense of community on campus.
Harvard University
Located in Cambridge, Massachusetts, Harvard encourages students to take a wide range of courses through their general education requirements, which allows students to broaden their interests and take advantage of intellectual curiosities. The school has 12 residential houses that seek to foster a sense of community in an otherwise imposing setting.
The University of Pennsylvania
Located in Philadelphia, Penn is known for its four distinct undergraduate colleges, including the Wharton School of Business and the College of Arts and Science. Students have the option of taking part in Greek life, and are also encouraged to explore opportunities in the greater Philadelphia area, from internships to the wide array of cultural events available.
Princeton University
Located in Princeton, New Jersey, Princeton University offers either a liberal arts or engineering and applied science degree for undergraduate students, with both programs including general education requirements. Princeton is known for its international affairs and engineering programs, as well as their storied eating clubs, which serve as coed dining halls and social centers for students, and are comparable to non-residential fraternities or sororities.
Yale University
Located in New Haven, Connecticut, Yale University is known for its creative writing and arts programs, as well as a residential college program and an array of secret societies. It’s also home to a renowned graduate drama program and law school.
Recommended: Ultimate College Application Checklist
Benefits of Attending an Ivy League School
For those who get that coveted acceptance letter, the benefits can be worth the years of hard work it took to get in. From growing your network to gaining access to world-renowned resources and professors at the top of their field, attending an Ivy League school can set students on an accelerated path to intellectual and professional success.
Having an Ivy League school on your resume may open countless doors when it comes to applying for jobs, fellowships, or graduate programs and may provide a leg up when it comes to advancing your career.
The amount of funding available at Ivy League schools can also be a major draw. All Ivy League schools have need-blind admissions policies, meaning that admissions officers will not look at a student’s financial need when considering their application. They also have a promise to meet 100% of demonstrated financial need based on household income.
Brown, Columbia, Harvard, and Princeton take things one step further, packaging aid with no loans for each student. Ivy League schools also have incredible funding opportunities for research and travel for students, allowing them to broaden their interests and perspectives.
Recommended: Paying for College With No Money in Your Savings
The Cost of an Ivy League School and Options for Paying for Tuition
All of the Ivy League schools are private universities, which usually implies a hefty price for tuition. The average undergraduate tuition for an Ivy League school for the 2022-2023 school year was $59,961, plus room and board. But due to these universities’ impressive endowments, ranging from Brown’s $5.6 billion to Harvard’s staggering $53.2 billion, these schools are able to offer generous financial aid packages to prospective students.
While Ivy League schools do not offer merit-based or athletic scholarships, there are generally a wide variety of need-based scholarships awarded to students depending on their household income.
A student’s household income is equal to the combined gross income of all people occupying the household unit who are 15 years of age or older. Among Brown’s class of 2025, for example, 99% of students with household incomes below $60,000 received an average of $80,013 in annual financial assistance — nearly full rides, including room and board. For families making between $100,000 and $125,000, 98% of students received an average of $56,538 in annual need-based aid.
In addition to aid offered by Ivy League schools directly, students or their parents may choose private student loans to help ease the burden of paying college tuition and expenses.
Students will generally want to exhaust all ffederal student aid options (which include grants, scholarships, work-study, and federal student loans) before considering private student loans. But if there is still a gap between federal student aid and the remaining cost of attendance, a private loan may be an option for some students. 💡 Quick Tip: It’s a good idea to understand the pros and cons of private student loans and federal student loans before committing to them.
GPA Requirements for Ivy League Schools
An impressive grade point average (GPA) is only one aspect of a student’s college application. However, to even be considered for admission to an Ivy League school, students may want to see if their own GPA falls within the average for admitted students. Among the Ivies that release statistics on accepted students’ GPAs, the average weighted GPA is about 4.0, meaning mostly As.
How to Make an Application More Competitive
In addition to a high GPA and impressive SAT and/or ACT scores, prospective students will need to prove themselves in other ways to gain admission to an Ivy League school.
Excelling in advanced courses, like honors and Advanced Placement (AP) classes throughout high school may improve students’ chances of admissions, especially if students show a particular area of interest, like science or humanities.
While in the past, college admissions counselors would advise students to be “well-rounded” candidates, it’s now advisable to develop and demonstrate a passion for a particular subject area, which helps Ivies to build a more overall well-rounded student body.
Students can show their interests beyond academics by taking part in extracurricular activities. By engaging in activities early in high school and growing that interest over time, students show their commitment and enthusiasm for a particular area.
Strong interviews and letters of recommendation can also improve a student’s application, along with a strong personal essay. Ivy League admissions teams look for essays that highlight a student’s best qualities, perhaps expressed through a personal anecdote or description of a unique passion that displays a candidate’s distinctive character.
Hitting the “Submit” Button
Following the tips above may help improve a student’s Ivy League application, helping to gain admission to one or more of the most prestigious universities in the world. Of course, there are many schools that have the same academic rigor of an Ivy League, and it’s generally advisable to sprinkle in one or two “safety” schools for good measure.
But once a student has decided they want to apply to an Ivy League school, determined which is the right one for them, applied for financial aid, and completed their applications, it’s time to hit submit!
The Takeaway
If you’re hoping to attend an Ivy League college, you’ll want to consider each school’s admission rate, along with its particular academic program and financial aid statistics, to determine which is the right school to apply to.
However, it can be helpful to apply to a range of schools, both in terms of admission’s standards and tuition costs. This will give you options in case a school’s financial aid package isn’t as generous as you hoped.
If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.
Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.
SoFi Loan Products SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Private Student Loans Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
With its vast landscapes and diverse cultures, Texas offers a tune for every soul seeking a place to call home. From the pulsing beats of its big cities to the mellow rhythms of its small towns, the Lone Star State has its own symphony of life. Dive in, and let’s explore the best places to live in Texas, where the horizon stretches as far as your dreams and where every corner sings its own unique song.
Population: 946,177
Average age: 33.7
Median household income: $78,965
Average commute time: 25.0 minutes
Walk score: 42
Studio average rent: $972
One-bedroom average rent: $1,677
Two-bedroom average rent: $1,939
Alright, alright, alright! Austin isn’t just the state capital; it’s the live music capital that’s a bubbling cauldron of culture, nature and rhythm. Located along the Colorado River in Central Texas, this vibrant Texas city boasts an appealing mix of live music, authentic Tex-Mex and rolling hills that’ll have you believing you’re in a perpetual state of golden hour. With Barton Springs to take a cool dip and trails that’ll lead you on a whimsical journey through Mother Nature’s finest, Austin is a testament to how humans and the environment can jam together harmoniously.
When it comes to making a living, compared to other Texas cities, Austin sets the pace. It has a thriving tech scene, making it one of the best places to live in Texas for job-seekers, innovators and dreamers alike. The University of Texas plants its roots deep in the heart of the city, nurturing minds and setting the pace for a bright future.
And that sense of community? It’s tighter than a snare drum, with folks who’ll greet you with that down-to-earth southern charm and a genuine “howdy.” So, if you’re looking for a slice of Texan paradise that’s got the soul of a poet and the energy of a rock star, you might just wanna mosey on down to Austin.
Population: 288,253
Average age: 38.9
Median household income: $99,729
Average commute time: 26.8 minutes
Walk score: 41
Studio average rent: $1,319
One-bedroom average rent: $1,592
Two-bedroom average rent: $2,142
Tucked away just north of the major center of Dallas, Plano is like that smooth, steady rhythm in a country ballad. It’s one of the many Texas cities where tradition melds with the contemporary, creating a melody of life that’s hard to resist. With sprawling parks stretching their green fingers across the cityscape and serene lakes offering a peaceful retreat, Plano’s natural beauty is a testament to the Lone Star State’s charm.
If we’re talking job opportunities, Plano’s jam-packed. Often hailed as one of the best places to live in Texas, this city has become a magnet for business, and why not? With a thriving job market, affordable housing and top-notch schools, the city’s got its finger on the pulse of prosperity. Immerse yourself into the community and you’ll feel that genuine Texan spirit, where neighbors quickly become family and every gathering feels like a backyard BBQ.
Population: 114,532
Average age: 40.1
Median household income: $130,000
Average commute time: 29 minutes
Walk score: 18
One-bedroom average rent: $1,160
Two-bedroom average rent: $1,621
Hidden among towering pines and gentle oaks, The Woodlands is like that quiet refrain in a song that captures your heart and soul. A master-planned community that’s designed to be in harmony with its environment, this place boasts winding pathways, serene waterways and pristine pockets of wilderness that’d make you think you’re in a Texas fairytale. It’s a dance between nature and civilization, where the pace of life finds that sweet spot between laid-back and lively.
Look beyond those tranquil trails and you’ll find a bustling hub of opportunity. The Woodlands is not just one of the best places to live in Texas; among the best cities, it’s also a hotspot for enterprises and a cradle for education. Here, businesses grow like wildflowers after a spring rain and schools sculpt the next generation with expertise and zeal.
Population: 2.288 million
Average age: 33.3
Median household income: $53,600
Average commute time: 26.1 minutes
Walk score: 47
Studio average rent: $1,230
One-bedroom average rent: $1,232
Two-bedroom average rent: $1,582
Houston is like that soulful guitar solo that starts slow but then takes you on a wild, foot-tapping ride. To put it simply, Houston is one of the cherished Texas cities with depth, energy and a whole lot of heart. As one of the largest cities in the U.S., the Houston population is sizable.
The sprawling Houston metro area weaves together a truly unique collection of cultures, flavors and sounds. Bayous snake their way through the city, offering pockets of green amid the urban bustle, while the scent of Tex-Mex and barbecue fills the air, making taste buds dance from dawn till dusk.
If you’re looking to put down roots in one of the best places to live in Texas, Houston’s got more than a few cards up its sleeve. With booming sectors from energy to aerospace, the job market here is as hot as a Texas summer. Pair that with some top-tier universities and schools, and it’s easy to see that Houston is invested in the future. Oh, and the community vibe? It’s like a big family reunion, accepting, full of life and always up for a good time.
Population: 1.288 million
Average age: 32.9
Median household income: $62,633
Average commute time: 25.7 minutes
Walk score: 46
Studio average rent: $1,472
One-bedroom average rent: $1,404
Two-bedroom average rent: $2,010
Dallas is like that infectious chorus you can’t help but hum along to, it has a clear style and an undeniable swagger. As the heart of North Texas, Big D pulsates with a certain energy, from the glitz of its downtown skyscrapers to the soulful hum of Deep Ellum’s blues.
But it ain’t all concrete and steel; the Trinity River winds its way through the historic downtown area, offering residents a slice of nature’s bounty right in their backyard. The Dallas Fort Worth area, with its unique blend of cosmopolitan sheen and Southern soul, confidently stakes its claim among the best places to live in Texas.
But what’s a song without its verses? Dallas belts out opportunities like a star on the rise. Downtown Dallas is a hub for commerce, tech and finance, Dallas draws dreamers and doers and offers them a stage to shine. Education takes the spotlight too, with institutions that nurture and challenge young minds, preparing them for the grand show of life. Look further into the neighborhoods in Dallas, and you’ll discover a community spirit that’s warm, welcoming, and as hearty as a Texas steak.
Population: 1.452 million
Average age: 33.8
Median household income: $55,084
Average commute time: 24.6 minutes
Walk score: 37
Studio average rent: $975
One-bedroom average rent: $1,142
Two-bedroom average rent: $1,416
San Antonio feels like the slow, mesmerizing strum of a steel guitar. Situated in Southern Texas, it’s a Texas city where history, culture and contemporary ideas converge in a harmonious melody. Settled along the banks of its namesake river, this city tells tales of battles past, while mariachi tunes float through the air, whispering stories of heritage and passion.
But San Antonio isn’t just about the past; it’s got an eye on the horizon. With an economy as spicy and varied as its famed Tex-Mex cuisine, opportunities sizzle in industries ranging from healthcare to tourism and beyond. The city’s schools and colleges stand tall, committed to churning out the leaders of tomorrow. For souls seeking a city that blends tradition with tomorrow, San Antonio just might hit the right note.
Population: 935,508
Average age: 33
Median household income: $67,927
Average commute time: 27.9 minutes
Walk score: 35
Studio average rent: $1,177
One-bedroom average rent: $1,412
Two-bedroom average rent: $1,782
Fort Worth has the charm of the classics with a touch of the modern beat. Dubbed ‘Cowtown’ due to its deep-rooted cowboy heritage, this city showcases rodeos and honky-tonks, making you tip your hat to the Texas of yesteryear. But amid the echoes of boot heels on wooden floors, there’s an urban sophistication that unfurls, with art museums and jazz bars painting a diverse canvas. The blend of the rustic and the refined makes Fort Worth stand out among the best places to live in Texas.
But let’s not stop at the surface. Look closer, and Fort Worth reveals a thriving economic landscape. From aviation to healthcare, this city’s opportunities soar as high as the Texas sky. With educational institutions fostering the spirit of inquiry and innovation, it’s a city where dreams are not just dreamt but crafted with purpose.
Population: 116,382
Average age: 35.1
Median household income: $85,350
Average commute time: 24.7 minutes
Walk score: 44
Studio average rent: $2,002
One-bedroom average rent: $1,671
Two-bedroom average rent: $2,125
Richardson is like that deep, soulful bass line underpinning a groovy track. It’s steady, foundational and undeniably cool. Just a stone’s throw from the bustle of Dallas, this city shines with a charm all its own, threaded with green belts and parks where nature whispers tales of timeless beauty. The serenity of Spring Creek and Cottonwood Park, coupled with the urban buzz, sets Richardson apart, making it easily one of the best places to live in Texas.
Dubbed the ‘Telecom Corridor’, Richardson isn’t just about leisure. It’s a hotspot for tech giants and startups alike, providing a dance floor where innovation takes the lead. Education here is top-tier, with the University of Texas at Dallas shaping bright minds and lighting the path forward.
Population: 11,072
Average age: 47.1
Median household income: $54,771
Average commute time: 20.7 minutes
Average rent: $1,250
Fredericksburg feels like that soft strum of a six-string on a porch as the sun sets. Fredericksburg is intimate, soulful and undeniably Texan. Tucked away in the heart of Hill Country, this affordable place blends German heritage with Lone Star spirit. With vineyards rolling out like nature’s own red carpet and historic architecture telling tales of yesteryears, Fredericksburg offers a retreat that’s both serene and spirited. Its quaint charm and pastoral beauty make its small-town charm resonate harmoniously among the best places to live in Texas.
Yet, beyond the initial allure of its winding trails and the melodies of its festivals and outdoor activities, Fredericksburg pulses with opportunity. Its growing tourism and thriving local businesses craft a strong culture where tradition meets enterprise. The town’s schools, with their commitment to nurturing roots while reaching for the stars, play a harmonious tune for the future of this steadily growing small town on the rise.
Population: 109,373
Average age: 41.5
Median household income: $123,261
Average commute time: 31.1 minutes
Walk score: 28
Studio average rent: $1,007
One-bedroom average rent: $2,693
Two-bedroom average rent: $1,665
Think of Sugar Land as that slow, sultry saxophone solo that fills a room with its rich, captivating tones. Nestled just southwest of Houston, this gem of a city sparkles like its name suggests, blending suburban serenity with an urban edge. Majestic oaks shade manicured streets, while shimmering lakes reflect the powerful Texas sun. Nature takes center stage, from the serenity of Brazos River Park to the chirping melodies of Oyster Creek. It’s no wonder Sugar Land strikes a chord among the best cities to live in Texas.
But don’t be fooled by its sweet facade; Sugar Land’s got rhythm and drive compared to bigger cities. The city has a bustling business sector, anchored by strong healthcare and energy industries, offering new residents a tune of prosperity that many are drawn to dance to. Schools here compose symphonies of success for the younger generation, making this an ideal spot for everyone from young professionals to established families to call home.
Settle down in one of Texas’ top spots
In Texas, there’s a city for everyone, be it under the bright city lights or the serene country stars. Finding the best places to live in Texas is like finding the perfect rhythm for one’s heart — it’s a journey of soul, spirit and endless possibilities.
You’re never alone in your search for the perfect place in the Lone Star State, so, when the dust settles and the music fades, remember: in Texas, home isn’t just a city; it’s a feeling. And the best place to fund that feeling is right here.
Rent prices are based on an average from Rent.’s multifamily rental property inventory as of June 2023.
Other demographic data comes from the U.S. Census Bureau.
The rent information included in this article is used for illustrative purposes only. The data contained herein do not constitute financial advice or a pricing guarantee for any apartment.
South Dakota is home to vast and varied landscapes like the stunning Badlands National Park and the towering Black Hills, alongside quaint and historic cities like Sturgis and Deadwood. With its outdoor activities and Old West heritage, South Dakota has many reasons that make it a great place to live. If you’ve been considering moving to South Dakota or buying a home in the state, you also probably have a budget you’d like to stay under as you look for a place to live. When it comes to buying a home in South Dakota the median home sale price is $375,000.
Don’t worry if that number doesn’t fit in your budget – we’ve got options to help you find a home or apartment that does. Redfin has rounded up a list of the 5 of the most affordable places to live in South Dakota, and they all have a median home sale price under the state’s average. Let’s jump in and see what cities are on the list.
#1: Aberdeen
Median home price: $218,950 Average sale price per square foot: $104 Average rent for a 1-bedroom apartment: $845 Median household income: $58,439 Nearest major metro: Fargo, ND (195 miles) Aberdeen, SD homes for sale Aberdeen, SD apartments for rent
With a median home sale price of $218,950, Aberdeen claims the first spot on our list of affordable places to live in South Dakota. About 28,600 people live in this city and it’s roughly 195 miles from the nearest metropolitan city, Fargo, ND. If you’re considering moving to this area make sure to explore Wylie Park where you’ll find Wylie Lake, a campground, and Storybook Land, or check out downtown Aberdeen.
#2: Brookings
Median home price: $265,000 Average sale price per square foot: $163 Average rent for a 1-bedroom apartment: $965 Median household income: $54,676 Nearest major metro: Sioux Falls (57 miles) Brookings, SD homes for sale Brookings, SD apartments for rent
Taking the second spot on our list of affordable cities to live in South Dakota is Brookings, about an hour drive north of Sioux Falls. When living in this city of 24,500 people, you can check out green spaces like Dakota Nature Park, Sexauer Park & Campground, and McCrory Gardens, explore the South Dakota Art Museum, and visit the downtown area.
#3: Rapid City
Median home price: $300,000 Average sale price per square foot: $200 Average rent for a 1-bedroom apartment: $1,230 Median household income: $58,072 Nearest major metro: Denver, CO (350 miles) Rapid City, SD homes for sale Rapid City, SD apartments for rent
Third is Rapid City where about 75,400 residents currently live. The median home sale price is $300,000 which is about $75K less than the median home sale price in South Dakota. If you find yourself moving to the third most affordable city in South Dakota, make sure to enjoy time outside exploring the Black Hills Caverns, or hiking, mountain biking, and taking in the scenery at Skyline Wilderness Area Park. You can also visit museums and sites like The Journey Museum & Learning Center, the Berlin Wall display, and the Museum of Geology.
#4: Watertown
Median home price: $310,000 Average sale price per square foot: $141 Average rent for a 1-bedroom apartment: $630 Median household income: $54,676 Nearest major metro: Fargo, ND (150 miles) Watertown, SD homes for sale Watertown, SD apartments for rent
A little more expensive than Rapid City is Watertown, the next city on our list. With a population close to 22,200, there’s still plenty to do in this city. Plan to check out Sandy Shore State Recreation Area along the shores of Lake Kampeska, visit Bramble Park Zoo, and explore the local shops and restaurants downtown.
#5: Sioux Falls
Median home price: $325,000 Average sale price per square foot: $182 Average rent for a 1-bedroom apartment: $1,017 Median household income: $54,676 Nearest major metro: Minneapolis, MN (270 miles) Sioux Falls, SD homes for sale Sioux Falls, SD apartments for rent
Consider adding Sioux Falls to your list of cities to consider living in if you’re looking for an affordable place to move to in South Dakota. With 181,900 residents, moving to this affordable city gives you the perks of city-life while still living close to nature. In Sioux Falls, you can visit Falls Park to see the waterfalls, check out the butterflies and animals at Butterfly House & Aquarium, and explore museums like the Old Courthouse Museum.
Methodology: All cities must have over 50,000 residents per the US Census and have a median home sale price under the average median home sale price in South Dakota. Median home sale price and median sale price per square foot from the Redfin Data Center during August 2023. Average rental data from Rent.com August 2023. Population and median household income data sourced from the United States Census Bureau.
Recent developments surrounding WeWork have brought into question again the future of the two big Unicorns in the real estate industry.
Compass and Opendoor
Back in July, this person (me) didn’t think too much about the future of the two big unicorns, Compass and Opendoor. Since then, Compass’ COO, Maëlle Gavet, has exited, stage right, following other key executives out the door. Out in San Francisco, Opendoor recently announced a bunch of new executive hires with technology/e-commerce know-how but not one whit of real estate experience.
Then this Inman article came out in the last week. For what it’s worth, I think that Greg Robertson is a smart business guy and he isn’t going to walk away from a deal with a unicorn, however short-term the arrangement may be.
The author was a little hard on Greg and he clearly isn’t a fan of Opendoor either. He also cites a study that, in the end, doesn’t reach any firm conclusion. Nothing necessarily wrong there but the author does go on to say that Opendoor needs agents more so than the agents need Opendoor. Bingo! Maybe that’s why Opendoor is cutting deals left and right with more recognizable industry names like W+R Studios and Keller Williams.
But Wait – There’s More!
Then there was this recent not-so-good assessment of Compass and Opendoor as candidates for IPO’s by a fellow who is definitely qualified to speak on such topics.
And then there’s this telling Inman article by Teke Wiggin hot off the presses in which Eric Wu makes a few statements that should turn heads and raise eyebrows. While this podcast with Kara Swisher runs 58 minutes, you can read the synopsis by Teke. Memo to Mr. Wu: Buying or selling a house is not like buying a car.
Last but not least, Opendoor’s massive personnel shift to Phoenix has yet to be reflected in any published operating numbers but it’s worth reading the company’s Glassdoor reviews from the past five or six months. To be sure, such reviews should be viewed as anecdotal. But it’s hard to ignore the volume of negative comments by current and former employees in such a short time span. Someone with some spare time might want to go through them in more detail, compare them to the initial flush of its employee startup enthusiasm from a couple years ago, and see if they can spot a few tell-tale trouble signs.
Technology as a Game Changer or a Green Curtain?
Third quarter numbers should be out in the next few weeks and everyone will be able to identify meaningful trajectories in the iBuyer market just by looking at Zillow’s and Redfin’s iBuyer segments. I’d love to hold off a few weeks and include those numbers in this write-up and I’m sure that someone like Rob Hahn or Mike Del Prete will publish some analysis of the market based on those numbers as well as any numbers that Opendoor chooses to release. And I’m also sure that Wall Street will continue to punish Zillow for at least another two or three quarters for its pivot a year ago to agent referrals and the iBuyer business.
Like I’ve said before, technology is very important in the real estate industry – ask people like Jeremy Sicklick over at HouseCanary. It still has a seat at the big table but it still isn’t the game changer that Opendoor has been advertising. And it may yet turn out to be simply a green curtain that Compass and Opendoor management have kept their operations hidden behind while they continue to shuffle management.
Boots on the ground, discipline of execution, and an in-depth understanding of the real estate business matter more than technology. Winter is still coming to these two Unicorns and the investing public at some point will get to see the financial books at Compass and Opendoor. Then we’ll all see if they are really what they claim to be. Based on the current situation and recent events, my bet is that people will be disappointed at what they see behind the green curtain.
Fun fact: your mortgage lender—the bank or company that granted you your loan—probably isn’t cashing your mortgage payment check each month. That’s because almost immediately after you closed on your loan, they turned around and sold it.
With the housing bubble that caused the recession still on everyone’s mind, it’s more important now than ever for home buyers to know how the system works—and how it went so wrong.
What many homeowners and buyers don’t realize is that there’s an entire secondary mortgage market where the lender becomes a seller. Here are the basics to help you understand how that market influences the primary mortgage industry and the rest of the economy.
What is the Secondary Market for Mortgages?
Once you close your loan, your bank takes it to a marketplace, where a variety of investors can purchase it. Sometimes, the final purchaser is lined up before you even close and the paperwork at your signing includes a statement as to who they will be.
The largest investors by far are Fannie Mae and Freddie Mac, two corporations that are owned by the United States government. They were designed to provide backing on the secondary market for low-income and very-low-income home purchases, and they have expanded under the Obama administration to take on more and more purchases.
There are other investors on the secondary mortgage market, and often those investors will purchase the loan and bundle it together with other loans into a fund called a mortgage-backed security, or MBS for short.
Understanding How Mortgage-Backed Securities Work
If your mortgage is bundled into an MBS fund, the investor or investment entity that created it then sells out shares of the fund to other investors in the same way they might sell shares of a mutual fund or a company’s stock.
Investors then buy the shares of the fund knowing that as the loans are paid, a portion of the returns (a.k.a. your interest payment) comes back to them. How large a portion depends on several factors, including how many shares of the security they bought, how many mortgages are bundled into the security, and how many of those loans are performing as expected.
The reason why such a large number of mortgages are bundled together? Reduced risk.
After all, if more mortgages are part of the fund, then when a few have repayment difficulties, that relatively small number is outweighed by the larger number of still-performing mortgages and the fund as a whole remains profitable.
For this reason, MBSs were, historically, one of the most secure investments available.
MBS Funds and the Financial Meltdown
Many homeowners are rightly wary about mortgage-backed securities on the secondary mortgage market in light of what happened with the financial meltdown of 2007-2008.
Here’s how it worked: private equity investors grouped higher- and lower-risk mortgages in separate categories, called tranches. They then sold these without disclosing the risks of investing in a particular tranche to the investors.
In fact, during this period, investors were rarely told about the tranches, leading to situations where investors were misled about the risks. When these funds began to fail, it affected many of the investors involved, and for many, it was the first time they fully realized which risk category their investment had fallen into.
The results are history.
MBS Funds in Today’s Secondary Mortgage Market
After the financial meltdown, the Obama Administration unveiled a comprehensive plan for reforming the mortgage market, one that put Freddie Mac and Fannie Mae front and center. The plan sought to achieve a few key changes to the market:
To use the government-backed corporations to underwrite mortgages and provide stability, so ordinary people could purchase with confidence again.
To expand the programs to cover most American home purchases in the short term.
To use FHA measurements to ensure that housing was being provided to low-income and extremely-low-income families who qualify.
To stabilize the market so banks could continue to offer mortgage loans with confidence.
To eventually scale back these programs as the private equity market regains strength, BUT
To fund all of the programs’ commitments for the duration of the loans they underwrite.
As a result of these clear policy goals, today’s secondary mortgage market is dominated by Freddie Mac and Fannie Mae, who acquire around 90 percent of all new mortgages between them.
MBS funds do still play a role in the marketplace, especially when it comes to jumbo loans, commercial real estate loans, and mortgages that do not meet Fannie Mae and Freddie Mac requirements.
As time goes on, they are also growing in popularity again, and the new regulations on their structure and constitution have restored some consumer confidence in their use.
Whoa, have you seen what just happened to interest rates!?
Suddenly, after at least fourteen years of our financial world being mostly the same, somebody flipped over the table and now things are quite different.
Interest rates, which have been gliding along at close to zero since before the Dawn of Mustachianism in 2011, have suddenly shot back up to 20-year highs.
–
Which brings up a few questions about whether we need to worry, or do anything about this new development.
Is the stock market (index funds, of course) still the right place for my money?
What if I want to buy a house?
What about my current house – should I hang onto it forever because of the solid-gold 3% mortgage I have locked in for the next 30 years?
Will interest rates keep going up?
And will they ever go back down?
These questions are on everybody’s mind these days, and I’ve been ruminating on them myself. But while I’ve seen a lot of play-by-play stories about each little interest rate increase in the financial newspapers, none of them seem to get into the important part, which is,
“Yeah, interest rates are way up, butwhat should I do about it?”
So let’s talk about strategy.
Why Is This Happening, and What Got Us Here?
Interest rates are like a giant gas pedal that revs the engine of our economy, with the polished black dress shoe of Federal Reserve Chairman Jerome Powell pressed upon it.
For most of the past two decades, Jerome’s team and their predecessors have kept the pedal to the metal, firing a highly combustible stream of easy money into the system in the form of near-zero rates. This made mortgages more affordable, so everyone stretched to buy houses, which drove demand for new construction.
It also had a similar effect on business investment: borrowed money and venture capital was cheap, so lots of entrepreneurs borrowed lots of money and started new companies. These companies then rented offices and built factories and hired employees – who circled back to buy more houses, cars, fridges, iPhones, and all the other luxurious amenities of modern life.
This was a great party and it led to lots of good things, because we had two decades of prosperity, growth, raising our children, inventing new things and all the other good things that happen in a successful rich country economy.
Until it went too far and we ended up with too much money chasing too few goods – especially houses. That led to a trend of unacceptably fast Inflation, which we already covered in a recent article.
–
So eventually, Jay-P noticed this and eased his foot back off of the Easy Money Gas Pedal. And of course when interest rates get jacked up, almost everything else in the economy slows down.
And that’s what is happening right now: mortgages are suddenly way more expensive, so people are putting off their plans to buy houses. Companies find that borrowing money is costly, so they are scaling back their plans to build new factories, and cutting back on their hiring. Facebook laid off 10,000 people and Amazon shed 27,000.
We even had a miniature banking crisis where some significant mid-sized banks folded and gave the financial world fears that a much bigger set of dominoes would fall.
All of these things sound kinda bad, and if you make the mistake of checking the news, you’ll see there is a big dumb battle raging as usual on every media outlet. Leftists, Right-wingers, and anarchists all have a different take on it:
It’s the President’s fault for printing all that money and running up the debt! We should have Fiscal Discipline!
No, it’s the opposite! The Fed is ruining the economy with all these rate rises, we need to drop them back down because our poor middle class is suffering!
What are you two sheeple talking about? The whole system is a bunch of corrupt cronies and we shouldn’t even have a central bank. All hail the true world currency of Bitcoin!!!
The one thing all sides seem to agree on is that we are “experiencing hard economic times” and that “the country is headed in the wrong way”.
Which, ironically, is completely wrong as well – our unemployment rate has dropped to 50-year lows and the economy is at the absolute best it has ever been, a surprise to even the most grounded economists.
The reality? We’re just putting the lid back onto the ice cream carton until the economy can digest all the sugar it just wolfed down. This is normal, it happens every decade or two and it’s no big deal.
Okay, but should I take my money out of the stock market because it’s going to crash?
This answer never changes, so you’ll see it every time we talk about stock investing: Holy Shit NO!!!
The stock market always goes up in the long run, although with plenty of unpredictable bumps along the way. Since you can’t predict those bumps until after they happen, there is no point in trying to dance in and out of it.
But since we do have the benefit of hindsight, there are a few things that have changed slightly: From its peak at the beginning of 2022 until right now (August 2023 as I write this), the overall US market is down about 10%. Or to view it another way, it is roughly flat since June 2021, so we’ve seen two years with no gains aside from total dividends of about 3%.
Since the future is always the same, unknowable thing, this means I am about 10% more excited about buying my monthly slice of index funds today than it was at the peak.
Should I start putting money into savings accounts instead because they are paying 4.5%?
This is a slightly trickier question, because in theory we should invest in a logical, unbiased way into the thing with the highest expected return over time.
When interest rates were under 1%, this was an easy decision: stocks will always return far more than 1% over time – consider the fact that the annual dividend payments alone are 1.5%!
But there has to be some interest rate at which you’d be willing to stop buying stocks and prefer to just stash it into the stable, rewarding environment of a money market fund or long-term bonds or something else similar. Right now, if a reputable bank offered me, say, 12% I would probably just start loading up.
But remember that the stock market is also currently running a 10% off sale. When the market eventually reawakens and starts setting new highs (which it will someday), any shares I buy right now will be worth 10% more. And then will continue going up from there. Which quickly becomes an even bigger number than 12%.
In other words, the cheaper the stocks get, the more excited we should be about buying them rather than chasing high interest rates.
As you can see, there is no easy answer here, but I have taken a middle ground:
I’m holding onto all the stocks I already own, of course
BUT since I currently have an outstanding margin loan balance for a house I helped to buy with several friends (yes this is #3 in the last few years!), I am paying over 6% on that balance. So I am directing all new income towards paying down that balance for now, just for peace of mind and because 6% is a reasonable guaranteed return.
Technically, I know I would probably make a bit more if I let the balance just stay outstanding, kept putting more money into index funds, and paid the interest forever, but this feels like a nice compromise to me
What if I want to Buy a House?
–
For most of us, the biggest thing that interest rates affect is our decisions around buying and selling houses. Financing a home with a mortgage is suddenly way more expensive, any potential rental house investments are suddenly far less profitable, and keeping our old house with a locked-in 3% mortgage is suddenly far more tempting.
Consider these shocking changes just over the past two years as typical rates have gone from about 3% to 7.5%.
Assuming a buyer comes up with the average 10% down payment:
The monthly mortgage payment on a $400k house has gone from about $1500 at the beginning of 2022 last year to roughly $2500 today. Even scarier, the interest portion of that monthly bill has more than doubled, from $900 to $2250!
For a home buyer with a monthly mortgage budget of $2000, their old maximum house price was about $500,000. With today’s interest rates however, that figure has dropped to about $325,000
Similarly, as a landlord in 2022 you might have been willing to pay $500k for a duplex which brought in $4000 per month of gross rent. Today, you’d need to get that same property for $325,000 to have a similar net cash flow (or try to rent each unit for a $500 more per month) because the interest cost is so much higher.
And finally, if you’re already living in a $400k house with a 3% mortgage locked in, you are effectively being subsidized to the tune of $1000 per month by that good fortune. In other words, you now have a $12,000 per year disincentive to ever sell that house if you’ll need to borrow money to buy a new one. And you have a potential goldmine rental property, because your carrying costs remain low while rents keep going up.
This all sounds kind of bleak, but unfortunately it’s the way things are supposed to work – the tough medicine of higher interest rates is supposed to make the following things happen:
House buyers will end up placing lower bids which fit within their budgets.
Landlords will have to be more discerning about which properties to buy up as rentals, lowering their own bids as well.
Meanwhile, the current still-sky-high prices of housing should continue to entice more builders to create new homes and redevelop and upgrade old buildings and underused land, because high prices mean good profits. Then they’ll have to compete for a thinner supply of home buyers.
The net effect of all this is that prices should stop going up, and ideally fall back down in many areas.
When Will House Prices Go Back Down?
This is a tricky one because the real “value” of a house depends entirely on supply and demand. The right price is whatever you can sell it for. However, there are a few fundamentals which influence this price over the long run because they determine the supply of housing.
The actual cost of building a house (materials plus labor), which tends to just stay pretty flat – it might not even keep up with inflation.
The value of the underlying land, which should also follow inflation on average, although with hot and cold spots depending on which cities are popular at the time.
The amount of bullshit which residents and their city councils impose upon house builders, preventing them from producing the new housing that people want to buy.
The first item (construction cost) is pretty interesting because it is subject to the magic of technological progress. Just as TVs and computers get cheaper over time, house components get cheaper too as things like computerized manufacturing and global trade make us more efficient. I remember paying $600 for a fancy-at-the-time undermount sink and $400 for a faucet for my first kitchen remodel in the year 2001. Today, you can get a nicer sink on Amazon for about $250 and the faucet is a flat hundred. Similarly, nailguns and cordless tools and easy-to-install PEX plumbing make the process of building faster and easier than ever.
On the other hand, the last item (bullshit restrictions) has been very inflationary in recent times. I’ve noticed that every year another layer of red tape and complicated codes and onerous zoning and approval processes gets layered into the local book of rules, and as a result I just gave up on building new houses because it wasn’t worth the hassle. Other builders with more patience will continue to plow through the murk, but they will have less competition, fewer permits will be granted, and thus the shortage of housing will continue to grow, which raises prices on average.
Thankfully, every city is different and some have chosen to make it easier to build new houses rather than more difficult. Even better, places like Tempe Arizona are allowing good housing to be built around people rather than cars, which is even more affordable to construct.
But overall, since overall US house prices adjusted for inflation are just about at an all-time high, I think there’s a chance that they might ease back down another 25% (to 2020 levels). But who knows: my guess could prove totally wrong, or the “fall” could just come in the form of flat prices for a decade that don’t keep up with inflation, meaning that they just feel 25% cheaper relative to our higher future salaries.
–
When Will Interest Rates Go Back Down?
The funny part about our current “high” interest rates is that they are not actually high at all. They’re right around average.So they might not go down at all for a long time.
Remember that graph at the beginning of this article? I deliberately cropped it to show only the years since 2009 – the long recent period of low interest rates. But if you zoom out to cover the last seventy years instead, you can see that we’re still in a very normal range.
–
But a better answer is this one: Interest rates will go down whenever Jerome Powell or one of his successors determines that our economy is slowing down too much and needs another hit from the gas pedal. In other words, whenever we start to slip into a genuine recession.
In order to do that however, we need to see low inflation, growing unemployment, and other signs of an economy that’s not too hot. And right now, those things keep not showing up in the weekly economic data.
You can get one reasonable prediction of the future of interest rates by looking at something called the US Treasury Yield Curve. It typically looks like this:
–
What the graph is telling you is that as a lender you get a bigger reward in exchange for locking up your money for a longer time period. And way back in 2018, the people who make these loans expected that interest rates would average about 3.0 percent over the next 30 years.
Today, we have a very strange opposite yield curve:
–
If you want to lend money for a year or less, you’ll be rewarded with a juicy 5.4 percent interest rate. But for two years, the rate drops to 4.92%. And then ten-year bond pays only 4.05 percent.
This situation is weird, and it’s called an inverted yield curve. And what it means is that the buyers of bonds currently believe that interest rates will almost certainly drop in the future – starting a little over a year from now.
And if you recall our earlier discussion about why interest rates drop, this means that investors are forecasting an economic slowdown in the fairly near future. And their intuition in this department has been pretty good: an inverted yield curve like this has only happened 11 times in the past 75 years, and in ten of those cases it accurately predicted a recession.
So the short answer is: nobody really knows, but we’ll probably see interest rates start to drop within 18-24 months, and the event may be accompanied by some sort of recession as well.
The Ultimate Interest Rate Strategy Hack
–
I like to read and write about all this stuff because I’m still a finance nerd at heart. But when it comes down to it, interest rates don’t really affect long-retired people like many of us MMM readers, because we are mostly done with borrowing. I like the simplicity of owning just one house and one car, mortgage-free.
With the current overheated housing market here in Colorado, I’m not tempted to even look at other properties, but someday that may change. And the great thing about having actual savings rather than just a high income that lets you qualify for a loan, is that you can be ready to pounce on a good deal on short notice.
Maybe the entire housing market will go on sale as we saw in the early 2010s, or perhaps just one perfect property in the mountains will come up at the right time. The point is that when you have enough cash to buy the thing you want, the interest rates that other people are charging don’t matter. It’s a nice position of strength instead of stress. And you can still decide to take out a mortgage if you do find the rates are worthwhile for your own goals.
So to tie a bow on this whole lesson: keep your lifestyle lean and happy and don’t lose too much sweat over today’s interest rates or house prices. They will probably both come down over time, but those things aren’t in your control. Much more important are your own choices about earning, saving, healthy living and where you choose to live.
With these big sails of your life properly in place and pulling you ahead, the smaller issues of interest rates and whatever else they write about in the financial news will gradually shrink down to become just ripples on the surface of the lake.
In the comments:what have you been thinking about interest rates recently? Have they changed your decisions, increased, or perhaps even decreased your stress levels around money and housing?
—
* Photo credit: Mr. Money Mustache, and Rustoleum Ultra Cover semi gloss black spraypaint. I originally polled some local friends to see if anyone owned dress shoes and a suit so I could get this picture, with no luck. So I painted up my old semi-dressy shoes and found some clean-ish black socks and pants and vacuumed out my car a bit before taking this picture. I’m kinda proud of the results and it saved me from hiring Jerome Powell himself for the shoot.
Of the many varieties of mortgage loans out there, the VA loan—a type of mortgage backed by the Department of Veterans Affairs—just might be the one with the most advantages. There’s no down payment required or mortgage insurance premium to pay. Plus, VA lenders are more flexible than conventional lenders when it comes to credit scores and loan limits, too.
Of course, not just anyone has access. VA loans are available only to active-duty service members and veterans who meet service requirements. In some cases, spouses can also qualify.
“They’re a major benefit—earned by people who have served our country,” says Rob Posner, CEO of mortgage lender NewDay USA.
If you are of the estimated 14.1 million living veterans or million-plus current service members who might qualify, here’s what you need to know to get started.
What is a VA home loan?
A VA loan is a mortgage guaranteed by the Department of Veterans Affairs. VA loans are typically issued by private mortgage lenders (we’ll go into the one exception later on) but the VA assumes some of the risk. This means if a VA borrower fails to make payments on their loan and defaults, the VA will repay the lender a portion of its losses.
Because of this added protection from the government, lenders (those who are approved to offer VA loans, at least) can be more lenient on credit score and down payment requirements when making these loans and lend out larger amounts.
Created in 1944 as part of the GI Bill of Rights, the VA loan program was intended to help service members returning from war more easily purchase homes and reintegrate into society. Today, VA loans account for about 11% of all mortgage activity, according to the Mortgage Bankers Association.
Types of VA loans
VA loans can be used for the purchase, refinance or renovation of a home (with some stipulations), and there are several types to choose from. Just keep in mind: Not all lenders can issue VA loans, and even among those that do, the loan options can vary.
VA purchase loan
The most common type of VA loan is the VA purchase loan, which allows you to purchase a property to live in as your primary residence. According to the Consumer Financial Protection Bureau, 57% of all VA loans originated in 2022 were used to purchase a home.
VA construction loan
Some lenders offer purchase loans that can be used to build a home from the ground up. These are sometimes referred to as VA construction loans. You’ll need to submit your building plans when applying for your loan and use a VA-approved builder. There are also certain appraisal and inspection requirements you will have to meet.
VA renovation loan
If you’re buying a home that requires some updating, a VA renovation loan allows you to finance the purchase price of the home—plus the costs of eligible repairs and improvements and ultimately roll it all into one balance. “These are great for buying a home that needs work that the seller doesn’t want to do,” says Garrett Puckett, CEO of lender Security America Mortgage.
Take note, though: You can’t use your renovation loans for just any project (sorry, no luxury upgrades such as a new swimming pool allowed). To qualify for VA funding, the updates must improve the safety or livability of the home—things such as fixing the stairs or improving accessibility. You’ll also need to complete the renovations within 120 days of closing on your loan.
VA Native American Direct Loan (NADL)
NADL loans are for Native American veterans or veterans married to a Native American person. They can only be used to buy, build or renovate a home that’s located on federal trust land—land that’s owned by the government but is set aside for a specific Native American tribe’s use.
These VA loans are issued directly by the VA and offer some of the lowest rates around. Currently, interest rates for NADLs issued after March 13, 2023, start at just 2.5%. (The VA sets the base rate for this loan type, and then lenders can adjust based on the borrower’s credit, loan term and other factors.) For reference, the average rate on 30-year conventional loans is currently 7.23%.
VA Interest Rate Reduction Refinance Loan
The VA’s IRRRL program is often referred to as a “streamline refinance,” as it’s designed to make refinancing quick and easy for existing VA borrowers. It requires no credit check, there’s no appraisal, and the whole point is to reduce the borrower’s interest rate and monthly payment.
VA IRRRLs “are much faster to get underwritten and closed because we need very little information,” says Mason Whitehead, who manages VA-approved lender Churchill Mortgage in Dallas. “We just refinance the loan and drop the interest rate.”
VA cash-out refinance
The other VA refinancing option is a cash-out refinance, which lets you borrow from your home’s equity. With these, you take out a new VA loan that’s bigger than your current mortgage, pay off your old loan balance, and get the difference back in cash.
Unlike the streamline refinance, you don’t need to have a current VA loan to use this program. So if you want to refinance from a conventional loan to a VA loan, for example, this is the program you’ll use.
How are VA loans different from other mortgages?
Once you have the loan, VA mortgages function much like other loan programs, allowing you to pay off the cost of purchasing a house over time. However, many of the upfront fees, qualifying requirements and application processes are quite different.
Down payments
Perhaps the biggest and best known benefit of a VA loan is that VA borrowers don’t need to make a down payment. Considering other loan programs require at least 3% down—or about $12,500 on a median-priced house—this can make it significantly easier for VA-eligible consumers to become homeowners.
There may be cases when borrowers want to make down payments anyway, pros say. If you have extra cash and want a lower monthly payment or to reduce your long-term interest costs, for example, you may want to put some money down. You can also lower your funding fee (more on these below) by making a down payment. As Whitehead explains, “It’s a sliding scale. The more down payment, the lower the VA funding fee.”
Funding fees
Most VA borrowers pay a funding fee—a one-time charge that’s designed to keep the VA loan program afloat. The fee ranges from 0.5% to 3.3% of the loan amount depending on the type of loan you use, how many times you’ve used your VA loan benefit (VA loan benefits can be used multiple times) and your down payment amount.
With a first-time VA loan with no down payment, the funding fee would be 2.15%—so $8,600 on a $400,000 loan, for example. And that’s only if you owed the fee. Some borrowers are exempt from funding fees if they have a disability due to their military service or if they meet other requirements.
You also have the option to roll the VA funding fee into your loan balance. Just be careful if you do this. Not only will it add to your long-term interest costs, but it could pose a challenge if you want to sell.
With this strategy, Whitehead says, “You end up owing more on the house than you paid for it. So, you need to be prepared to live in the house for quite a while to build up equity, so that when you do sell the house, there is sufficient equity to pay off the mortgage and closing costs.”
Loan limits
With VA mortgages, there are no loan limits, and technically you can borrow as much as you need. (Before 2020, down payments were required for loans above certain limits.) This is different from other government-backed loan programs, which have set thresholds for how much you can borrow. On FHA loans, for example, you can’t borrow more than $472,030 in most parts of the country.
That’s not to say that the sky’s the limit with VA loans. VA lenders will still look at your down payment, monthly income and debt to determine how large a loan you can afford to comfortably repay.
Credit score requirements
Unlike other government-backed mortgage programs, the VA doesn’t have any set credit score requirements. Instead, it lets lenders set their own standards. Because of this, credit score minimums can vary quite a bit from one lender to the next—ranging anywhere from 580 to 640, depending on which company you go with.
VA loans also aren’t subject to a VA debt-to-income ratio maximum, so lenders have leeway here, as well. This can make them “more flexible and easier to qualify for than conventional loans,” says Jennifer Beeston, a lending executive and branch manager with Guaranteed Rate.
Interest rates
Interest rates charged on VA loans tend to be lower than on other mortgage types, since the VA assumes some of their risk. Currently, the average rate on a 30-year VA mortgage is 6.908%, according to mortgage pricing engine Optimal Blue.
VA loans
FHA loans
Conventional loans
Aug. 24, 2023
6.94%
7.09%
7.28%
Aug. 24, 2022
5.34%
5.57%
5.74%
Aug. 24, 2021
2.72%
3.14%
3.06%
Aug. 24, 2020
2.64%
2.98%
2.91%
Aug. 23, 2019
3.59%
3.99%
3.84%
Optimal Blue
With VA loans, borrowers can choose a fixed interest rate, which remains consistent for the entire loan term, or an adjustable rate. These are interest rates that start low and fixed, but eventually adjust annually or every six months.
Property requirements
VA loans can only be used on properties that meet certain “Minimum Property Requirements”—a list of basic must-haves that ensure the place is safe, sound and free of health hazards. These include having working electric and HVAC systems, being absent of lead-based paint and wood-destroying insects and having a leak-free roof.
To confirm a property you’re trying to buy meets these requirements, you’ll need to get a VA appraisal before you can close on a VA mortgage. These can only be done by VA approved appraisers and typically cost between a few hundred dollars to over $1,000 depending on the size of the home and where it’s located. You’ll pay for this as part of your closing costs. If you are buying a condominium, the VA must also approve the condo complex.
Who can get a VA loan?
VA loans are only available to active members of the U.S. military and veterans who meet military service requirements, as well as some National Guard and Reserve members. Some spouses can qualify, too. This is the case if a veteran spouse is missing in action, a prisoner of war or died while in military service or from a service-related disability.
Here’s a look at exactly who can use VA loans and the unique requirements they need to meet:
Group
Time of service
Service requirements
Active military members
Currently serving
90 continuous days or more
Veterans
Aug. 2, 1990 to present
One of the following:
– 24 continuous months
– The full period you were called to active duty (must be 90 days or more)
– 90 days or more if you were discharged for a hardship or reduction in force
– Less than 90 days if you were discharged due to a service-related disability
Veterans
Sept. 8, 1980 to Aug. 1, 1990
One of the following:
– 24 continuous months
– The full period you were called to active duty (must be 181 days or more)
– 181 days or more if you were discharged for a hardship or reduction in force
– Less than 181 days if you were discharged due to a service-related disability
Veterans
May 8, 1975 to Sept. 7, 1980,
Feb. 1, 1955 to Aug. 4, 1964, July 26, 1947 to June 26, 1950
One of the following:
– 181 continuous days
– Less than 181 days if you were discharged due to a service-related disability
Veterans
Aug. 5, 1964 to May 7. 1985, Nov. 1, 1955 to May 7, 1975 (in the Republic of Vietnam), June 27, 1950 to Jan. 31, 1955, Sept. 16, 1940 to July 25, 1947
One of the following:
– 90 continuous days
– Less than 90 days if you were discharged due to a service-related disability
Veteran officers
Oct. 17, 1981 to Aug. 1, 1990
One of the following:
– 24 continuous months
– The full period you were called to active duty (must be 181 days or more)
– 181 days or more if you were discharged for a hardship or reduction in force
– Less than 181 days if you were discharged due to a service-related disability
Veteran officers
May 8, 1975 to Oct. 16, 1981
One of the following:
– 181 continuous days
– Less than 181 days if you were discharged due to a service-related disability
National Guard
Aug. 2, 1990 to present
90 days of active duty
National Guard
Prior to Aug. 2, 1990
One of the following:
– 90 days of non-training active-duty
– 90 days of active duty service, including at least 30 consecutive days
– 6 creditable years in the National Guard and an honorable discharge or retirement
Reserve (any branch)
Aug. 2, 1990 – present
90 days of active duty
Reserve (any branch)
Prior to Aug. 2, 1990
One of the following:
– 90 days of non-training active-duty
– 6 creditable years in the Selected Reserve
Plus one of the following:
– An honorable discharge
– Retirement
– Transfer to Standby Reserve or another Ready Reserve element after honorable service
– Continued Selected Reserve service
How to apply for a VA loan
Not all mortgage companies offer—or are even allowed to offer—VA loans, so your first step is to find a VA-approved lender.
Once you’ve found one, the application process looks like this:
1. Apply for your Certificate of Eligibility
Your Certificate of Eligibility is a document that confirms you meet the eligibility requirements of the VA loan program.
You can request one online (within your VA.gov account), via mail or through your mortgage lender. Depending on what type of service member you are, you may need to show a copy of your discharge papers, service record, annual point statement, active duty report or a statement of service signed by your commander, adjutant or personnel officer. The VA has a full list of COE requirements, but if you choose to go through your lender, your loan officer will let you know what documents you need.
2. Get preapproved
After you’ve received your COE, you’ll need to apply with your lender for preapproval. This requires filling out a loan application (usually online) and providing some financial documents, such as your tax returns, pay stubs and bank statements. The lender will also pull your credit score and report and consider your debt-to-income ratio in the process. Again, VA loans are more flexible when it comes to these financial details, so if you’re worried about qualifying, talk to a loan officer. You may be surprised.
Once they’ve evaluated your application and finances, they’ll give you a preapproval letter stating how much you can qualify to borrow and at what interest rate. Be aware, though: This doesn’t mean your loan has been approved. Your lender will need to do a final approval after you’ve found a home and it’s been appraised.
3. Find a home
The house hunt is next. When you find one you’re ready to buy, you’ll include your preapproval letter in your offer. If the seller accepts, you’ll sign a purchase agreement, let your loan officer know and begin the full loan process.
Make sure your real-estate agent knows you’re using a VA loan before you make an offer. VA loans allow the seller to pay certain fees and closing costs, so they may want to negotiate for some of these on your behalf.
4. Have the home appraised
Your lender will order the VA appraisal next to ensure the property meets the VA’s Minimum Property Standards and that the amount you’re looking to borrow matches the home’s actual value. If the home is appraised at a lower amount than what you’ve offered to pay, you may need to renegotiate with the seller or make up the difference in cash.
5. Go through underwriting
After your home has been appraised, your loan will move into underwriting, which is when your lender gives everything a final look. They may request updated documents at this step, especially if it’s been a while since your initial application.
You will also need to secure homeowner’s insurance at this point, as it is required before you can close on your loan.
6. Close on your VA loan
Finally, it’s closing time. You’ll meet with your loan officer, closing agent and, sometimes, real-estate agent to go over the final paperwork.
Once you sign, pay your closing costs and any down payment you’ve decided to make, you’ll officially be a homeowner. You should get your keys and be free to move in shortly.
More on mortgages
The advice, recommendations or rankings expressed in this article are those of the Buy Side from WSJ editorial team, and have not been reviewed or endorsed by our commercial partners.