Buying a Home

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Pending home sales are up for the second month in a row

October 18th, 2010

First-time homebuyers can make the purchase rewarding with careful planning and financial honesty

A glimmer of positive movement surfaced in the real estate market this week–­pending home sales increased for the second straight month. Low interest rates make purchasing a home very attractive now.

For first-time homebuyers, the process can be intimidating, but breaking down the steps brings the experience into perspective. Here are some hints to make your home purchase as smooth as possible.

Determine a budget–Be honest about how much you can spend. Factor in expenses not directly included in the actual purchase price, such as closing costs, inspections, repairs and mortgage insurance. Also think about long-term expenses–in addition to the mortgage payments, utilities, insurance, small and large disasters and maintenance can eat up a large chunk of your monthly income.

Just because you’ve been pre-approved for a $200,000 loan at $2,000 a month doesn’t mean it’s a good idea to spend that much. By pushing your financial limits, you could be “house rich and cash poor” or even houseless should your income be severely diminished.

Find a reliable lender–­This is important and will avoid unpleasant surprises down the line. For starters, discuss your potential mortgage with a loan officer at your bank and get some basic figures. Ask your real estate agent for referrals. Loan officers who have a good working relationship with real estate agents will be fair and get the loan closed on time. (By the way, there are no referral fees; that’s illegal and a good agent would never do that.)

Be competitive and fair–In a slow moving market, some homebuyers feel that sellers are so desperate to sell their home that they will take any lowball offer just to move on. That can be very insulting to a seller, who may not wish to deal with you. Of course you want the best price possible, but the process entails mutual respect, a reasonable starting bid, and fair market value.

Choose your agent carefully–Not only should professionalism and a great sales record be a choice for an agent, but personality plays a part too. Interview several agents and, all being equal at the end, decide which agent you would best work with on a personal level.

Plotting a methodical, sensible course to home buying with your dream house as the prize at the end will make the process less stressful and more rewarding.

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With a plan and a dose of flexibility you can find the right house for now and the future

August 16th, 2010

Even if it doesn’t have everything you want now, good financial planning will help

Is now the right time to buy your first or next home? With interest rates low, prices at a fair level and many choices out there, the temptation is to jump into the real estate market. The question is how to decide what you can afford, what features are a must, and what would be great but not a necessity.

Affordability
Even before you make a list of what you want and where you want it, the first consideration is: can you afford it? That’s non-negotiable. Consider long-term expenses, not just the up-front incentives that can dazzle a buyer. Over extending a budget for a few glitzy perks is a disaster in the making. The standard in financial planning is to spend no more than 35% of your pretax income on the mortgage, insurance and home insurance. You’ll also want to pay at least 20 percent down on the property and get a fixed-rate loan so you know exactly what your monthly payments will be.

The list
Here’s where you will detail, on paper, the type of home you want and the location. Be realistic about the positive and negative features and consider the long-term consequences of each feature. Think ahead. Don’t just buy a home for now, but consider the future. Resale value is an important factor, style can be an issue, plus room for children (and schools) and physical needs for aging parents who may move in.

Flexibility
Consider your purchase as a long-term investment, not a short-term gain. Now you have time to choose what you absolutely cannot do without, and what features are flexible. Most buyers won’t find everything they want at a price they can pay. So, if a swimming pool is on your list but the property you like doesn’t have one, putting a pool in is a goal for the future. Ditto for cosmetic things like countertops, bathroom spas and landscaping. While you may not have these up front by choosing a home with a mortgage you can manage, you’ll have the financial flexibility in the future.

With an organized home buying plan, you can minimize a great deal of the emotional impact. By determining your buying power, your wants and needs, and having an organized search plan, your chances of a stress-free experience are much better.

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Down payment assistance makes home ownership easier

March 24th, 2010

Homebuyers can take advantage of a variety of tax credits to choose the perfect home.

An array of financial assistance for home purchase is available for qualified buyers in just about every income level. Of course there’s the $8,000 tax credit for first-time buyers and $6,500 for repeat buyers, which expire on June 30, but potential buyers can also look for help with the down payment.

Here’s a run down of what to expect:

The city of St. Charles– The HOME St. Charles Down Payment and Closing Costs Assistance Program helps low to moderate income purchasers to become homeowners. HOME St. Charles will make up to $10,000 available for qualified households to help with the down payment and closing costs. Down payment assistance for St. Louis County is $3,000 and Jefferson County $7,500.

Income levels apply and the sale price must be under $185,000. A mandatory nine-hour home buying seminar and a one-on-one counseling session to review finances and credit history is also required.

And there’s more. The Missouri Housing Development Commission is offering up to a $1,250 credit in property tax breaks for qualified buyers with an extra $500 thrown in if the house is energy efficient or if the buyer begins energy efficient steps within 60 days of closing. The MHDC offers more assistance, administering a number of housing programs, from purchasing a home with a First Place loan, assistance for veterans, buying property in a disaster area, foreclosed properties and home repair grants.

The federal government is also offering tax credits for energy efficient upgrades, up to $1,500 or 30 percent of the improvement cost, which includes windows and doors, insulation, roofs, air conditioners and furnaces. The tax credit is applied for either 2009 or 2010 taxes and expires on December 31, 2010.

With all of this assistance, plus a wide variety of properties to chose from, now is really the time to make that move!

Written by Myra Vandersall

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Borrowers will assume more costs as a result of FHA changes

February 8th, 2010
The move is designed to generate additional income to ensure FHA solvency.
Borrowers who choose Federal Housing Authority (FHA) programs will see increased costs involved with that agency’s mortgage insurance and will have to have higher FICO scores. The move provides more financial stability for the FHA as rising defaults dipped below required reserves. Right now one in six FHA borrowers is behind on payments.

David Stevens, FHA commissioner, says “the FHA has a responsibility to be fiscally sound and to protect homeowners who trust the FHA to give them financing that will allow them to live in their homes for the long term.”

Up-front Mortgage Insurance Premiums (MIP) will be 2.25 percent, an increase from 1.75 percent. With FDA mortgage insurance, buyers can put as little as 3.5 percent down in comparison to the traditional 20 percent most lenders expect. However, to qualify for the 3.5 percent, borrowers must have a credit score of 580; prospective buyers whose credit scores are lower will have to put down 10 percent.

Another change is the amount of seller concessions from six to three percent. This change brings the FHA more in line with traditional industry standards and gives the borrower a greater stake in their home purchase.

Created by Congress in 1934 during the Great Depression and in economic times very similar to what we are experiencing today, the FHA provides mortgage insurance on loans made by FHA-approved lenders, but does not issue the loans. The agency currently insures 5.5 million mortgages.

Written by Myra Vandersall

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Is 2010 the perfect year to buy the perfect home?

January 13th, 2010

While all the signs point to a continued buyer’s market, some common sense, financial stability and planning will make buying a home affordable.

The word on the street is that 2010 will be a prime year to purchase affordable real estate. Considering the stresses of the past few years, good news is always welcome. However, buying a house this year should be a thoughtful, planned process and not a decision to be made because of an array of incentives. Those incentives last for a year or so, and your mortgage lasts for 30 years.

Home values have reverted to 2003 levels, fixed mortgages are at near record lows, and foreclosures continue to rise, especially in the high-end real estate categories. The stars may have aligned in your favor to buy, but first consider your financial future.

Stable employment is a necessity. Unemployment is still high, around 10 percent, so the best advice is to assess your job status and be as confident as possible that you will still be working. That being a given, here is good information you need to know about real estate in 2010.

Prices to bottom out. On a national level, home prices went down nearly nine percent between the third quarter of 2008 and the same period in 2009, according to the S&P;/Case-Shiller home price report. The second quarter decline was near 15 percent and the first quarter a 19 percent decline. Prices will continue to decrease a bit through third quarter 2010.

Mortgage delinquencies will continue to increase. At the end of third quarter 2009, about one in seven mortgages were past due or in foreclosure. Look for the delinquency rate to go up even further; about one in four homeowners owe more on their mortgage than the property is worth at today’s prices.

Upscale homes going into foreclosure. Foreclosure sales will hit about 1.9 million in 2010, with a growing number of those homes in the upper price brackets. While this does not mean the upscale foreclosed house will be a steal, this trend will add more variety to the market.

Mortgage rates will go up. Rates on a 30-year, fixed mortgages averaged 4.88 percent in November, down from 6.09 a year earlier. A contributing factor was the Federal Reserve program that purchased debt and mortgage-backed securities from Fannie Mae and Freddie Mac. That program will expire at the end of first quarter 2010 and interest rates may rise.

It’s a buyer’s market–for now. 2010 will still be a buyer’s market and should ease the pressure of a quick purchase. That balance will change as the year goes on, if the economy improves but will still give potential buyers some breathing space.

Tax credits available through June. Lower prices and lower mortgage rates are enhanced with tax credits for first-time buyers ($8,000) and repeat buyers ($6,500). As tempting as this is, you do need to consider the long haul when you buy a home and all the expenses involved.

With careful planning, a solid financial base and common sense, 2010 may indeed be the year to buy that home.

Written by Myra Vandersall

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