We’ve talked about what a major decision home buying is. Buying a home is one of the major life choices we humans make, and it is important not to take it lightly. Do your research; consider ALL your options, and weigh the pros and cons of buying your own home. Doing this will reduce stress and help you realize what your goals really are, and help you have realistic options.
Some pros of buying a home may include the freedom to decorate and design it yourself, or the ability to have more space for your growing family. If you’ve been living in an apartment, a pro would be not having to worry about bothering the neighbors, or them bothering you. Some cons of buying your first home may be that you don’t think you can afford the monthly mortgage, or maybe you’re not sure you have enough money to move. Whatever your needs as a home buyer are, be optimistic, and more importantly, realistic about what you need and what you can afford. Getting the help of a great Realtor who can help you find a good lender is one way to make a great start to your first home!
Buying your first home is an exciting and nerve-racking process that is often long and stressful. Before you consider looking for a new home, it is important to be realistic about what you can and cannot afford. Be honest with yourself, and your real estate broker about your income, expenses, debt, and personal goals.
If you’re thinking about buying a home, first consider the debt you have already incurred. If you are buried in student loans, and credit card debt, try to minimize that debt before adding a mortgage onto your expenses. It is also important to have a good credit score to better your chances of being approved for a home loan. If you don’t have an overwhelming amount of debt, and have a reliable source of income, you are probably ready to purchase your first home. You should have a sizeable down payment ($10,000 or more) before you begin shopping around for a home. If you have minimal debt and a down payment saved, begin reserving money into an emergency fund for a greater cushion when your mortgage kicks in. Being a responsible spender with realistic budget expectations are the first steps to being ready to purchase your own home.
My mortgage guy tells me it’s a great time to get a refinance done for your house if you would like to reduce your interest rate or need to get money out for repairs, kid’s schools, etc. You will need to be prepared to qualify with a full documented loan as there are no longer loans that are no documents or stated income loans. This will affect those who have their own businesses more than anyone else as the income can be reduced tremendously by write-offs on taxes.
You will also want to make sure you improve your interest rate by at least a point if you are strictly doing a rate/term refinance and that you intend to occupy the property for at least another five years. This should allow enough time to go by so you can make up the additional cost of a refinance. The longer you stay in the property the more you will save in interest over time.
If you don’t know whether it makes sense or not, contact a lender and ask them to walk you through the numbers. It is certainly worth talking to somebody to make sure if it’s right for you or not.
Believe it or not, according to the USA Today, the biggest defaulters are the wealthy. They took out large mortgages to buy mansions, or what some call mini-mansions, and they just assumed they would sell at a profit several years down the road for a nice profit. However, the market collapsed and their plans were thwarted. Thus they are now defaulting at a much higher degree than less expensive loans.
The cut off is a million dollar home so one in seven borrowers with a loan balance a million dollars or more are seriously delinquent. That is compared to one in twelve borrowers for loans below the million dollar mark. Since the sub-prime borrowers are supposed to be the ones that are causing all these foreclosures, it is interesting to discover that the wealthiest borrowers are actually the ones with the highest delinquent rates. This does not mean that the sub-prime market was not a contributor but does say this issue is seemingly hitting every economic level. It also means that if you are in the market for one of these larger homes, you might just be able to pick one up as a bank owned or foreclosed property. If you require a loan this would follow the jumbo loan guidelines and they generally have a higher interest rate.
After the April 30 end to the home buyer’s tax credit, mortgage applications took a nosedive to a 13 year low nationwide. While apps are still down, they have risen about 7% over the May numbers and since interest rates are still really good, it is still a very good time to buy a home if you are in the market.
Another measure that is awaiting Senate approval is an extension to the home owner tax credit for those who are waiting to close their current contract. In other words, this covers those who had a contract ratified by the April 30, 2010 date but have not been able to close or don’t think they will be able to close by the June 30th deadline. This bill HAS NOT passed the Senate as of yet but they are trying to get it done by the end of the month. This would extend the closing date to the end of September and give those people another few months to close. This will really help those purchasing new construction, which has a tendency to go over the proposed finish dates. I will keep you posted as to what happens next. In the mean time, if you know of someone who is looking to buy or list their home I would love the opportunity to visit with them.
When it comes to real estate there are just certain things that you cannot do anything about and mortgage rules are one of those things. What people need to know is the truth about what they can afford to buy and the best loan to get them where they want to go. Anything else is just fluff. Most people can deal with the truth as well as obstacles that come their way. What they have a hard time dealing with is not hearing anything about their loan.
One of the loan officers I use often puts it this way, “It’s just news and once we all know it, we can adjust to it and figure out a solution” and I couldn’t agree more. Clients need to have their phone calls and emails returned in a timely manner from their mortgage guy or gal as well as from their Realtor. Clients deserve to be treated with respect; and they deserve to know the truth when it happens, not several days right before closing. These are the things that separate the good from the great, and I believe my team can deliver great!
It is important that first-time homeowners eligible to claim the first-time homebuyer tax credit know the IRS released a new form today that they will need to get that credit properly processed. They also announced new documentation requirements to deter fraud related to the first-time homebuyer credit. With the release of Form 5405, First-Time Homebuyer Credit and Repayment of the Credit, and the related instructions, eligible homebuyers can now start to file their 2009 tax returns. Taxpayers claiming the homebuyer credit must file a paper tax return because of the added documentation requirements. Make sure you discuss this with your tax preparer.
In addition to filling out a Form 5405, all eligible homebuyers must include with their 2009 tax returns one of the following documents in order to receive the credit:
- A copy of the settlement statement showing all parties’ names and signatures, property address, sales price, and date of purchase. Normally, this is the properly executed Form HUD-1, Settlement Statement.
- For mobile home purchasers who are unable to get a settlement statement, a copy of the executed retail sales contract showing all parties’ names and signatures, property address, purchase price and date of purchase.
- For a newly constructed home where a settlement statement is not available, a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.
In addition, the new law allows a long-time resident of the same main home to claim the homebuyer credit if they purchase a new principal residence. To qualify, eligible taxpayers must show that they lived in their old homes for a five-consecutive-year period during the eight-year period ending on the purchase date of the new home. The IRS has stepped up compliance checks involving the homebuyer credit, and it encouraged homebuyers claiming this part of the credit to avoid refund delays by attaching documentation covering the five-consecutive-year period:
- Form 1098, Mortgage Interest Statement, or substitute mortgage interest statements,
- Property tax records or
- Homeowner’s insurance records.
The IRS also reminded homebuyers that the new documentation requirements mean that taxpayers claiming the credit cannot file electronically and must file paper returns. Taxpayers can still use IRS Free File to prepare their returns, but the returns must be printed out and sent to the IRS, along with all required documentation.
Normally, it takes about four to eight weeks to get a refund claimed on a complete and accurate paper return where all required documents are attached. For those homebuyers filing early, the IRS expects the first refunds based on the homebuyer credit will be issued toward the end of March.
It’s been said many times over the past couple of years that the mortgage rates are at “historic lows” and then they go back up a little bit and you hear they are still really low. While some people seem to perpetually “chase the rate” and hope to get it at an all time low, sometimes it’s just good to get a better payment and deal while you can.
Last week mortgage rates fell again to one of these almost to the all time lows and people were clamoring to see how much they could save on their payment. I talked to one of my lender friends and he told me one thing to always keep in mind when someone asks about saving money; are you looking to save money overall or just monthly? What people need to remember is it costs money to close even a refinance loan and those that tell you it is at no cost most of the time means it’s at no money out of pocket to you. The money comes out of the equity in your property and that will cost you at the time of sale.
There was a time when 15 year mortgages were the rage, if you could afford them. They had higher payments but you would pay off your loan in 15 years instead of 30. While people request them every once in a while we are seeing less and less of them during these economic times. I have asked around and have received a consensus; it seems that people are just unsure about their economic future and would rather have a lower payment with the ability to pay off the mortgage earlier if they choose.
You can get a 30 year mortgage and pay it off in 15 years by consistently paying extra toward your principle each month. If you pay one additional mortgage payment per year, you will knock off approximately 7 years on the original 30, or pay for about 23 years. If you pay 2 mortgage payments extra per year you can knock off a little more than 11 years. There are many mortgage calculators online that can help you calculate your mortgage to 15 years or call your loan officer to help you. This way you can always pay extra and if you find that you can’t pay the extra you can pay the normal 30 year payment.
I recently had a client that lived out of state and was moving to the Middle Tennessee area to be near their family. They had a mortgage approval from an out of state mortgage company and was determined to use that company, which, in the beginning, was okay with me. We found a home that was just perfect and started the process. Everything was going great with the exception of the mortgage and I encouraged them to look at a couple of local companies that I had worked with before that I felt could get the job done in a timely manner.
For over a month and a half this drug on until the seller set a deadline for the buyers. Another week went by until the buyer finally agreed to talk to a lender here in town. This lender was able to get the loan done in a little over a week! We met the seller’s deadline and both the buyers and sellers were happy and relieved. This deal would not have closed if not for the relationships that I have formed over the years in the real estate business. Realtors do much more than “show houses”. We help with negotiations, contracts and bring professionals in to do good and valuable work on your behalf. We have a team of people behind us as well as years of dedicated experience. That’s why you need to work with a Realtor!
