Home Mortgage and Refinancing » Buying a Home

20 Percent down: Not for New Home Buyers

Mortgage Maven — Thu, 05 Aug 2010 05:27:03 +0000

Mortgage experts for many years have advised and advertised the essential need to place 20 percent down on a new home purchase. This has been so frequently drilled into most people’s minds that the 20 percent rule is now simply accepted. However, new arguments exist that deter from this strategy beyond future avoidance of damaging perosnal credit and the need for future bad credit loans. The following are some reasons why you may not agree with the 20 percent rule either.

* Finding a home that costs less than $200,000 is difficult at best. Even at this unusual price, 20 percent down requires you to have a minimum of $40,000 on hand. This can be an arduous task, and for many, it is simply impossible. The only other alternative for such a significant amount is to borrow it from a retirement fund or other savings vehicle.

* Saving so much money likely will require many years. Throughout that time, your dream home may sell to another buyer or increase in price.

* The money devoted to a huge down payment is probably better served in another manner. Whether this means developing an emergency fund, saving for retirement or conducting crucial repairs to an existing home, those are more valuable alternatives. Saving is most crucial during a person’s early years, and putting money aside for a down payment means other life areas are being neglected.

* The time required for such a down payment may be spent on rent instead of applying it toward home equity. This can further reduce your financial power by negating your tax return deductions through a lack of mortgage interest.

Do Not Become Burdened by the Cost of a Dream Home

A home mortgage can be akin to tying your hands together, but saving for such may be even more detrimental. You must ensure that you do not buy a home that you cannot comfortably afford. Life becomes quite sober when you cannot pay for a small vacation or afford to fix an inoperable furnace.

In short, many reasons exist why you should not provide a 20 percent payment when purchasing a new home. Other investment options may be a smarter choice, and you may save yourself a lot of time in getting into your dream home more quickly. While going into a home without a down payment is risky, not investing your money wisely is also dangerous. Determine how to combine your assets so they work optimally for you. This will help you realize your dream home and other financial goals.

Buying Short, Buying a Foreclosure – Is it worth it?

Mortgage Maven — Fri, 23 Jul 2010 17:23:05 +0000

Are you planning to go for a short sale or a foreclosed property? Have you looked into its benefits and difficulties? Is it really worth your time and money? Is it a good investment? You will get many more questions after listening to the amazing deals on such properties. Local Realtors confirm your fears saying that it is not an easy task. You will need money for purchasing Orlando investment property, for example, but that is alone not enough. You will need a lot of time, smartness, patience and expert advice to go through a successful investment in such property. There are times when this purchase will have great values for the buyer, since there will be less focus on inspection issues but the process tends to be mostly long and frustrating. This will certainly not suit an impatient buyer or those looking for quick occupancy.

The buyer will require lots of money for property investment in Orlando FL (using the above situation) since he/she will also need to fix things up and get it ready for renting or re-listing. Consulting an experienced lawyer to manage such transactions and a licensed real estate agent will help a lot. At times, these transactions can be endless owing to difficulty in closings. Since the bank needs to approve, this process can last for months but later get rejected outright. The lender thus may not own the property, since it is sold to the purchaser and entity has to weigh in.

Bank-owned foreclosures may proceed quickly when the banks need to dispose the property off but others pose difficulty. It is the duty of the agent and the lawyer to deal with such silences and communicate openly with the purchaser if they want the transaction to proceed and end successfully. Thus it is recommended to approach an expert who can help in purchasing foreclosures or other investment opportunities.

Buy to Let Property for a Steady Income

Mortgage Maven — Fri, 23 Jul 2010 13:12:03 +0000

In the current market scenario, investing in property might be a tricky deal which is why you must be careful when you are looking for buy to let property. However, if you are prepared for the initial capital investment, you can turn the proposition into a profitable one. First, you must find yourself a good property in a healthy neighborhood, where there is a fair chance of real estate development in the coming years, like numerous Charlotte investment property areas. You might need to upstage the house a bit before you can find the tenants to your liking and rent to them on your terms. But this will be at an extra cost, so you must be sure such an initial upfront cost is in your budget.

While buying a property for buy to let purposes, you must keep your potential target tenant in mind before you look for the right options. You should also look at a lot of options to find out which is the safest bet, as it must be a house that is attractive and will draw tenants as that is your primary purpose. One example is to take a slightly more expensive yet popular neighborhood in Charlotte. It might cost more for the property, but you might offset that added cost by having more reliable tenants and those willing to pay a premium for the area.

Currently, you are walking in with the assumption that the prices might fall or remain the same for a few years, thus not earning you much profit either way. You must negotiate and for that proper training is required to understand the real estate market. Unless you have a real estate agent who will deal on your behalf, you must certainly be well versed with the entire situation to get the house at a price that is comfortable for you and whose mortgage payments you can manage, even when the property doesn’t have tenants for a couple of months.

Having too much greed when you have a tenant or being over ambitious doesn’t work well when becoming a landlord. You must know the value of your property and hence decide what would be an attractive rent. Too less will mean you stand to lose, while too high would indirectly cause a loss too as tenants wouldn’t turn up instantly. So it has to be the right balance. You have to find tenants who will maintain the house well, so that you don’t have to spend a lot for the maintenance of the house. Secondly, the tenants must be consistent in their monthly payments so that you don’t have issues with the mortgage either. Lastly, you must find tenants who will adhere to your terms and conditions which will be of real help and reduce risk when you own property.

Five Tips to Buying a Home

Mortgage Maven — Wed, 26 May 2010 10:41:06 +0000

Are you thinking about buying a home but not quote sure it is the right time? There are many people in the same boat. They want to buy a home but are a bit afraid that home prices will continue to fall. For this reason, most buyers will not purchase unless they feel like they got a deal. Here are five tips to help you locate a good value:

1) Be Realistic

The real estate market is fairly efficient. All information about the market is easily available so most properties sell for close to what they are worth. Sure, as a Realtor I see some places sell for far less or more than true market value but most properties sell for about the right price. Every home buyer wants to find that fantastic steal. However, chances are that if the home you like is worth around $400,000 based on similar homes that have recently sold then you will probably have to pay around $400,000 give or take 5%.

2) Find a Good Realtor

Hiring a good Realtor won’t cost you any more than hiring a bad one. In fact, a bad one might be more expensive. Even though they might represent you, real estate agents are compensated by the seller. This may be your largest transaction ever so hire someone to help you. A Realtor can help educate you on the market by sending you what is for sale, what has sold, and homes that failed to sell.

3) Learn the market

If you have no knowledge of the real estate market how will you determine a good value? I could show you a home well market value but if you don’t know what things are selling for then you won’t recognize the value. Have your real estate agent send you homes that have recently sold in the areas that you like. You stand to get a better chance to find a deal if you are an educated buyer.

4) Preparation is crucial

Don’t wait until after you find a great house to get financing arranged. Make sure everything is prepared prior to looking for a home. Some buyers find a great opportunity but lose it because they just are not ready. You may run into competition with other buyers. Prepared buyers will win. If you are the home seller would you take an offer from Buyer 1 who is pre-approved for a mortgage and willing to close in 3 weeks or Buyer 2 who has not arranged financing and can’t close for 90 days? Lending guidelines have changed over the last few years so get that out of way before looking at home. You may be looking at $300,000 homes when you can really only afford $200,000 homes. Know this ahead of time.

5) Don’t Procrastinate

If a good deal crosses your lap and you are prepared then act on it swiftly. Good deals can be snapped up quickly. Do not let paralysis of analysis get the better of you. If you have market knowledge, are represented by a good Realtor, are prepared and have done your homework then make an offer.

Follow these five tips and you will be stand a great chance of finding a good home value. People who find great values became experts, accepted a dose of reality, hired good help, were prepared and then acted swiftly.

Marc Rasmussen sells Sarasota FL homes for sale and has a Sarasota mortgage blog.

Buying A Home In Missouri

Mortgage Maven — Thu, 20 May 2010 20:22:27 +0000

Buying a home in the post real estate crash environment has been a shock to most people. Lending standards have returned to historical trends in which lenders are looking for large down payments and plenty of reserves. Debt to income ratios must be well within the safe zone and income must be well documented. None of these requirements are extreme; in fact, these requirements have been the norm for decades. They only feel difficult to comply with because in recent years borrowers have been accustomed to loose lending practices.

Home buyers looking to make purchases in the state of Missouri are no different from anywhere else in the country. Despite the fact that Missouri is by no means a prime example of real estate gone awry it is a market that is relatively an average for the country at large. Real estate prices are a bit lower than the national average, at least in many regions of the state, but generally buying a home in Missouri should be standard when compared to the requirements of real estate transactions across the country.

The first thing you need to do to start the process of buying a home is to find a good real estate agent or broker with a localized Missouri real estate license. Above all a salesperson cannot broker out or sale homes in the state without a license native to the state. You also need to make sure your finances are in order before you start the process.

Make sure your down payment is in cash sitting in your account. Make sure that the cash is aged, meaning, make sure it has been sitting in the account untouched for months before applying. Many financing deals fall apart for simple reasons like this. Also make sure to pay off any debts you can a few months ahead of the application. This removes the debts from your credit report and lowers your DTI. Also make sure you have thorough income documentation in place before the application as this is very heavily weighed in the underwriting process.

In selecting the home you choose to buy make sure to not stretch your budget at all. The more wiggle room you have the more likely your purchase transaction will play out without problems. If you find it difficult to find something lower in your budget try searching for FSBO MLS listings. Properties which fall under this category will pay less in fees as the sellers are not using an agent. They may be more willing to split the cost savings with you.

Remember; each real estate market is unique. If you are very familiar with the state of Missouri and especially the local market you may be able to do more of the home buying process yourself. If on the other hand you are new to the home buying process and unfamiliar with the Missouri real estate market then make sure to have a professional by your side guiding you through the process.

New Home Construction Costs

Mortgage Maven — Fri, 07 May 2010 00:21:23 +0000

The cost of building a new house in America has gone up substantially during recent years. Especially since people have discovered that imported building materials like Chinese drywall aren’t always the best or safest. In fact after seeing all of the Chinese drywall problems during the last few years many people have specifically sourced materials made in America.

Besides raw land cost, building materials continue to be one of the driving factors for the total cost of construction for new homes. Many of the standard building materials are now produced much more efficiently, but people are demanding more sophisticated materials – even for mid-priced houses. Everyone expects more quality and as a result the net cost of materials is still on the rise.

In addition, almost every demographic that can afford to build a house is looking for much bigger houses today than 30 years ago throughout America. In the 1970’s the average size of a new home in the United States was 1,200 square feet. Today the average is approximately 2,300 square feet. So even the lower end houses are almost 100% larger than similar houses in years past.

The cost of labor continues to rise, even though in the short term many trades have been laid off during the recent recession. Fewer certified tradespeople per capita than 20 years ago means there is still a relative shortage of skilled workers in certain categories. Especially electricians and plumbers. If your region hasn’t experienced this yet, it certainly will over the next few years.

The average total cost to build a new home in the United States is usually between $100 and $200 per square foot. Of course this varies depending on your region and the quality of home, but $150 per square foot is pretty standard for construction of a new mid-level house. Only 10 years ago the average was closer to $90 per square foot. Quite a rise in such a short period of time.

Five Basic Areas to Know for First Time Home Buyers

admin — Thu, 08 Oct 2009 19:21:12 +0000

If you are buying a home for the first time. It is imperative to know several important aspects of the process. The glossary of loan terms is one thing that you should familiarize yourself with. However here are the 5 areas that can be critical. Being aware of these will help you avoid costly mistakes.

Today home loan programs are more responsible with FHA being the most popular with a minimal 3.5% down. A family member can gift you the required down payment. It is preferred to have between 10-20% down. If you can muster 20% down you may avoid mortgage insurance.

Real Estate agents will want to know that your are pre-qualified. This entails a look at your income, assets and credit history. It is a prime indicator of your sales price limit, ability to repay the loan and your probability of paying back the loan. In this step, your monthly payment is determined based on the current interest rates. Your credit score will also determine the rate. A score of 700 or higher earns you the best rates. Financial experts recommend around 25% of your income as a mortgage payment. A debt ratio of 38% or higher becomes a concern with regards to affordability. Your assets will be verified to confirm down payment, closing costs are in the bank and for how long. You may need 2-6 months of payment reserves to allow a cushion depending on loan product.

You will want to know your costs of doing your home loan. The Good Faith Estimate is the disclosure for this. It will detail all the loan particulars such as interest rate, monthly payment etc. It mostly gives you the detail of fees from the lender, title and escrow, and your taxes and insurance prepaid amounts. Keep in mind initially it is an estimate just as the title implies. You should get this disclosure before you leave a lender or shortly after a phone application. It is wise to keep this form to keep everyone generally accountable. Expect reasonable differences however as factors change along the way.

Your trusted local real estate agent and home loan professional will help guide navigate you through the process. You are now pre-qualified for a purchase price and can start looking for a home with features and location in mind. In the process of negotiation, it is normal to ask the seller to pay 3-6% of the closing costs. Check with your loan professional to be sure your loan product allows this. After making an offer, you will likely get accepted! This is the good news you want to get started. Now the ordering of the home inspection, appraisal, formal loan approval and satisfying underwriter conditions begin. Expect to be asked for more information, possible delays, and roadblocks as part of the process to completing your purchase.

The Closing is what is considered drawing loan documents for signing the deed of trust, the note, and all disclosures in title. In some cases a mobile notary may be used. Finally your loan should be ready to fund and record. Now the house is yours!

To sum it up, good communication and experienced professionals will help make the overall transaction smoother. Choose carefully in the beginning who you want to work with. Cathy Acosta of Mission Hills Mortgage Bankers says, I love first time home buyers as I am a teacher at heart and can empathize with their inexperience. It is important to not assume buyers know or understand the loan process fully. Seek people you trust and are recommended. Learn as much as you can and most importantly take the initiative.

Some Tips That The First Time Home Buyer Should Know

admin — Thu, 08 Oct 2009 18:40:15 +0000

Starting off on the adventure of buying a first home is exciting, as well as thrilling for you and your partner who are ready to start a family of your own. However, there are still many things that must be known in advance that will be of great benefit later on. Some of these tips are well known, but others are not and you may not even know them.

One thing to know when you are a first time home buyer is don’t wait for the great market timing, especially in places like Southern California, Miami are even New York. And while some regions may cool, don’t count on it. If you find something that is right for you, then you should grab it. Even though interest rates are at historical lows at the moment, they may not last long.

You can find many free or low cost resources on the internet. In just one search engine you can find buying guides, checklists, and many online tools to help you determine interest rates, home values, and many others. Watch out for free property evaluation websites, these are usually real estate agency trying to fish for clients. Make sure there are no ’strings’ attached. Through the internet you can check out and take advantage of first time buyer programs, and even get into one if you want.

Since you won’t have a lot of extra time or money to waste by messing around, you should start off by first determining a realistic budget. Unfortunately, many first time buyers think they will afford their dream home the first time around, but in most cases this will not be happening.

To make thing easier it would be wise to go to a lender and get “pre-approved”. What this consists of is a calculation of your income to debt ratio and your credit score which will tell you realistically what you can afford.

Once that is done, sit back and make a wish list. This can be things you absolutely need to have. This could be a yard for future children, how many bedrooms and bathrooms or even perhaps alternative energy possibilities. Remember to stick to your list so you don’t get side tracked or let emotions interfere with reality.

Fortunately, there are several programs for home buyers that not only help you get the house you want, but also help with other aspects of home buying like reducing debt or finding out what mortgage and title companies want. These programs also provide incentives for completion of their programs and this can be something like financial assistance, caps on real estate agent fees or lower mortgage interest rates. Another advantage for graduates of such programs is that assistance is often available if unexpected problems arise, like deferring payments or even loan forgiveness in rare cases.

Look on the internet for more information. It is also a good idea to check with your local agencies, like you local Housing and Finance Association for their first time buyers programs. Each state and community is different, so make sure you check carefully for programs that are available in your area.

Do National Housing Trends Mean Anything?

admin — Wed, 09 Sep 2009 08:15:14 +0000

Every day the news gives a different picture of housing trends on a national level. Sometimes the story reflects that property prices are done deflating while others say that the devaluation process will continue. However, for the individual homebuyer these national trends mean very little because they generally do not apply to local markets.

The movement of each housing area is different; some areas have seen values driven up by speculators, some are still experiencing a decline in values, while yet other markets have stabilized. Because of this it is important to know that local market activity could be very different than the national housing trends so paying attention to national reports is of little value. It is imperative that potential homebuyers give strict attention the activity of the local market before making a home purchase there.

If the potential home buyer is using a real estate agent, the agent is likely to provide an accurate assessment of the situation. However, a real estate agent has a vested interest in making a sale, so the information they provide might be overly optimistic. While the advice of an agent is a good place to start, their advice should not be considered exclusively.

Websites like Trulia (www.trulia.com) make doing your own research easy. On websites such as this a homebuyer can find a wealth of information about the market being considered including current home values, what they are selling for, and pricing history. There may also be a local site that would include the same information if the larger sites do not cover a certain area. If there is no information online, research can be done through public records. This would provide information about current sale prices.

The real estate bubble burst in 2007 making it imperative that anyone considering a home purchase finds out how the local market has cycled and what is currently happening there. If there has been a decline in the number of homes for sale, and an increase in prices this indicates that the market is climbing up from the bottom of the cycle. It also indicates a fairly favorable time to invest in a home. However, it is important to find out if buyers are purchasing multiple properties. If this is the case it indicates that speculators are driving up home values and it does not necessary mean it is a good time to buy. Talking to real estate agents and taking a look at the public sale records can help a purchaser recognize the actual state of the market and improve their investment choices.

Regardless of what national or regional trends say, when it comes to real estate these trends are virtually meaningless. Careful research of the local conditions and markets is vital to making a wise investment.

What Costs to Consider when Purchasing Rental Investment Property

admin — Tue, 08 Sep 2009 06:38:01 +0000

The process of searching for investment rental property can be exciting; however, before you get too excited it is important to run some preliminary numbers to make sure you know exactly what you are facing to ensure a successful investment.

Be sure to carefully look for potential rental income. If the property has already served as a rental property, you need to take the time to find out how much the property has rented for in the past and then do some research to determine whether that amount is spot on or not.

Most of the time, properties may have rented for lower than they should have while in other cases a property may be over-rented. Look at comparably in the area to make sure you know whether the property in question is on target; otherwise you may find that the amount you think you will be receiving in rental income is not very likely.

You need to consider mortgage interest very carefully. Make sure you know and understand prevailing interest rates as well as the details of your specific loan because mortgage interest is the biggest cost you will face when purchasing investment property. First, understand that homes and duplexes tend to have loan structures that are very much exactly the same as any mortgage loan.

With a larger property; however, such as a triplex; rates tend to be higher. If you are looking at commercial property with even more units; the matter of terms and rates is completely different. Typically, the more money you are able to put down on the purchase of the property, the less interest you will have to pay.

Taxes are another issue. Many people use the taxes from the year in which the property was purchased and assume they can use these figures to estimate expenses. This is not always the cases because taxes do not remain the same; they typically change every year.

You will normally find that, taxes go up after a property is purchased. This is especially true if the property was previously owner occupied. So, it is typically a good idea to just assume that the taxes will go up on the property after you have bought it.

One area which many people fail to take into consideration is the cost of the property being vacant. While you would certainly hope that your property would remain rented all the time, this simply is not realistic. There will probably be times when your property will be vacant. Generally, you should assume that your property will have an average 10% vacancy rate.

A major consideration is the cost of tenant turnover. This is often a big surprise to many landlords who assume they will rent out their properties and their tenants will remain in the property for some time. Even more of a surprise is how much it costs to prepare the property to rent out again especially in like of that consideration.

Some of the other costs include not only advertising for a new renter but also repainting, cleaning, etc. If damage was done to the property, the total cost of repair may not be fully covered by the security deposit you charged in the beginning.

Of course, the cost of insurance should also be taken into consideration. Keep in mind that the insurance for investment properties is usually higher than an owner occupied property. Make sure you obtain a quote rather than just using the insurance cost for your own home as an estimating guide. In addition, make sure you take into consideration not only property insurance but also liability insurance as well.

Utility costs are another area that are frequently under-estimated. If the property has already served as a rental property make sure you find out exactly what the owner pays for and what the renters pay for. You should also make sure to find out whether you will be responsible for other costs such as trash collection. Finally, take into consideration the costs of property management if you will not be managing the property yourself.