Posted by Elizabeth Dennis on June 20, 2011 | No Comments
Buying a house for the very first time is often an intimidating process. Simply deciding whether to buy or rent requires a great deal of thought and analysis. There are some individuals who simply prefer to rent instead of taking on the responsibility of home maintenance. And many are afraid of committing to significantly higher monthly payments that are required with owning a house.
But naturally, there are numerous advantages to owning your very own home. You are able to deduct from your federal income taxes the interest you pay on your home mortgage (you can also do the same with the property taxes you shell out on your home).
Knowing that your monthly payments are contributing to equity on your property is comforting – the fact that a house is considered an investment signifies that the worth of your home will likely increase. Despite the fact that housing values for a few have gone down since they purchased their properties, other buyers who hold onto their homes long enough will often see their home values appreciate considerably.
Do your Homework
You will find many books and websites on the topic of buying your first home. As with anything you are learning for the very first time, the information can at first be overwhelming and you may wonder how you will ever get it all straight. But wrapping your head around the terms used in the real estate market is a must – and with time, it will all begin to make sense. Keep reading, researching, and asking questions.
Work on Building a Down Payment
Obviously, you must consider the down payment. There are programs that are out there that help first time buyers get into a home with a low down payment. But remember that typically the smaller the downpayment, the higher the monthly mortgage payment.
And for a first-time home buyer who is used to a lower rent payment, a high mortgage payment can be a fiscal shock to their systems. Getting your fiscal house in order and starting to build a down payment should be the priority of any first-time buyer.
Work with a Financial Professional
A lot of first-time buyers feel that they can make a larger mortgage payment than realistically possible. This is where it helps to bring in a financial professional who can look at your monthly salary and allotments and can make an unbiased assessment of what you can actually afford. Obviously the mortgage lenders have their own formulas for qualifying a home buyer, but it is important not to overextend yourself when trying to get into the housing market. Don’t forget that even though you end up getting a fixed mortgage payment, property taxes can rise dramatically especially if your town decides to put in a new high school or middle school. Leaving yourself some breathing room for such a circumstance is good prior planning.
Know your Credit Score.
Your past history paying bills is paramount when it comes to qualifying for a home mortgage. If you have a history of being delinquent on car or credit card payments then this will hurt you when it comes to asking for a loan for a house. You can get your credit report for free at www.annualcreditreport.com. It is an official government site. You will be able to receive your credit report but you will have to pay roughly $20 for your credit score. If your score is low then you should work hard to raise it to acceptable levels before applying for a mortgage.
Buying a home for the first time can be a daunting task. By doing your homework, building a solid down payment, knowing what you can pay each month, and building good credit, you’ll be well on your way to the satisfaction and gratification of home ownership.
Posted by Elizabeth Dennis on March 20, 2011 | No Comments
Buying a house is not as easy as finding the one you want and then getting a loan to pay for it. Instead, there are numerous additional expenses called closing costs. At closing, the buyer becomes the official owner of the house. This can involve numerous people from lawyers to real estate agents and most will have some sort of cost for their participation or services rendered. This is where housing closing costs come in and they can run into the thousands of dollars.
Keep in mind that not costs are the same. They can vary by hundreds of dollars depending on which part of the country you live in. However, there are some rough estimates you can follow to get an idea of how much closing is going to cost. First, be sure to get a good faith estimate from your lender. Take this estimate and compare it to an online closing cost calculator. If you are coming up with a big difference in fees, be sure to bring any questions up to your real estate agent and lender before signing any documentation at the closing.
There are numerous housing closing cost fees. For example, expect to pay between $50 and $100 for a credit report. You will have to have the house you are looking at appraised and that will cost between $200 and $400. The recording and notary fees will cost between $50 and $100. Escrow fees are some of the most expensive and can be as high as $800 or as low as $200. All of the documents have to be prepared and the cost of doing so can run up to $100. You must have a house inspected before you buy it and that can tack on an additional $150 to $250. Transfer fees are generally up to $100 and lawyer fees can run up to $500. In all, you could find yourself paying close to $4000 in fees as you close on your new home.
But what happens if you find yourself short of cash at the closing? In this case, it may be possible to roll the fees into the loan. However, this can only be done under certain circumstances. If you didn’t spend all the money the bank was willing to lend on the house, then you can just add in the closing costs with little problem. If, however, you are close to the loan-to-value ratio, then you might need to get a little more creative. If you have already reached the maximum LTV, you may need to ask for a seller concession. Here, you go up on the agreed on selling price by 6% or so. Then the seller “gives” the buyer back that six percent for closing costs. For example, if you get a loan for $90,000 on a $100,000 home, the buyer increases the price by 6%. The buyer then puts down $10,600 rather than $10,000 and the loan is increased. The extra money is then used to pay the closing costs. An easier way to have the costs taken care of is to find a very motivated seller who is willing to pay all the closing costs for you.
Posted by Elizabeth Dennis on January 5, 2011 | No Comments
With more people than ever suffering from bad credit, many believe it may be impossible to qualify for a home loan. However, even with less than perfect credit, it is still possible to achieve the American dream. Even with a bankruptcy or foreclosure there are still options available to you.
If you have bad credit, you probably have either fallen behind on bills at one time or another, have too many credit cards, received calls from debt collectors, declared bankruptcy, had a foreclosure or been turned down for additional credit. If any of these items, apply to you there are ways to still be approved for a home loan.
The easiest way to qualify for a loan is to improve your credit. This may take anywhere from one to five years. You ultimately want your credit score to be over 600. Anything below this will result in you likely being turned down or being forced to pay extremely high interest rates. You can improve your credit by paying all your bills on time, avoiding a second bankruptcy and using credit to build credit by putting a small amount on a card each month but also paying it off each month.
Another way to purchase a house with poor credit is to find a lender which specializes in bad credit. Here, there are two different types of loans you may qualify for. The first is a bad credit secured loan. This is the hardest to qualify for because you will have to put assets or collateral down in order to get this type of loan. The second loan is a bad credit unsecured loan. These loans are harder to come by in the wake of the real estate downturn, but you can still qualify based on your income level and ability to repay the loan.
One of the best ways to buy a home with little to no credit is go after an owner financing solution. This is a win-win situation for both the buyer and the seller and lets those with poor credit get a home with no money down. With this option, the buyer lives in the home and pays rent with the option to buy. Once the buyer has repaired their credit within one or two years, they apply for a loan and then purchase the house for an agreed on price. Here, you are living in the house before you purchase and will be able to make any upgrades or changes you would like since it already essentially yours.
If you do have bad credit and dream of owning a home, get started today in repairing your credit and saving for a down payment. Ideally, you would like to have 10% to put down in order to make yourself most attractive to lenders. If you also have a bankruptcy on your record, you will want to wait four years after the filing to qualify for a conforming loan. In addition, with a foreclosure you will need to wait about two years to qualify for a loan. You can get a loan in a much quicker amount of time; however you could find yourself paying a high interest rate and being forced to put down a 20-35% down payment.
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