How to Make Home Buying Easy on your Budget

Most people buy a home only once or twice in their lifetime, and it rarely makes sense to buy if you expect to move within two years. Most buyers live in their new homes an average of seven years or more. During a housing slump it may not seem like real estate values will ever go up, but it usually does. Homes appreciate about 4-5% per year as a fairly general rule. 

Financially, there’s a lot at stake when you buy or sell a home. Unfortunately, many of the factors involved are beyond your control. An inspector might discover a fault that you were unaware of, or interest rates could jump without warning. The first step is to hire a good real estate agent. Here’s how you can eliminate buyer’s remorse and purchase the home you love for a price you can afford:

* Bear the location in mind

What type of neighborhood would you like to live in? What school district would be suitable for your family? Where do you like to shop?

Do you own a vehicle, or would you have to take public transportation? Do you need a driveway? If you already have an area in mind, you can start by driving around and looking for “For Sale” signs.

* How much house can you afford?

Even if you’re short on funds, the home buying process will go smoothly if you get familiar with the real estate market and narrow down your choices to fit within your budget.

Speak to a lender to see how much you can get pre-approved for. You can use your pre-approval letter as leverage, especially if the seller receives another offer similar to yours.

* House size matters

You can start the process of finding a perfect home once you have a workable price range. List the things you want, like hardwood floors, skylights or a spacious living room, and the things you definitely need, like three bedrooms, a garden, a first-rate school district, etc. If you discover a house that comes close to having all your needs but doesn’t have all you want, give it another look.

During a housing slump, it’s possible to buy a large home at significantly less than its listing price. This is because so many people are desperate to sell. Remember to take into consideration the physically challenged family member who may need wheelchair access, or the heart patient who cannot climb too many stairs to get to her room.

* Find a way to finance your new home

There are a number of mortgage loans nowadays that suit many different people for different reasons. The three most common are fixed rate, where your payment is fixed for the life of the loan, adjustable rate, where the rate can go up or down after a few years, depending on the market, and interest only mortgages, where for a specified time you’re allowed to make payments that cover only the interest portion of your monthly mortgage payment.

The 5 Most Common Mistakes That Can Hurt Your Home Mortgage Approval

Recently, President Obama put into action the Homeowner Affordability and Stability Plan to help Americans on the brink of foreclosure to receive the loan modifications they need to be able to stay in their home.  This could be the closest we get to a consumer bailout, but the money won’t be available to just anyone who applies.

Most Americans know that they should pay their bills on time to help their credit score, but there are many other factors that can dramatically affect your ability to get a loan.  Let’s take a look at the 5 most common credit mistakes:

1.  Maxing out your credit cards

Repayment ability is the main factor that lenders are looking at, which is essentially your debt-to-income ratio.  If you have a small amount of debt compared to your income, you’re in a much better position to pay off what you owe (quickly).  Before you apply for a home loan, try to avoid charging a lot on your credt cards, so that your balance stays low.  If you carry a balance month-to-month, try to pay them down as much as possible.

2. Buying a car on borrowed money

One of the biggest mistakes many families make is financing a car or other major purchase right before they apply for a mortgage.  Sometimes is can mean the difference between approval and denial.  Wait until after your loan has closed - not just been ‘approved’ - before you take out another loan.

3.  Procrastinating

When you’re looking to refinance an adjustable rate mortgage (ARM), don’t wait until crunch time.  Start preparing at least a year in advance.  Most homeowners wait until just 2-3 months before the expiration of their initial rate, and this can really limit the number of available options. 

4.  Reconciling old bad debt

If you have old charge offs or collections on your credit history, it might seem like a responsible idea to pay down or completely pay off these debts.  Unfortunately, by paying into this debt, your credit report adjusts it to ‘current debt’ which makes your credit problems seem more recent than they were.

5. Reaching out for help

Credit counselors will often give advice that is relevant for getting you out of debt, but typically neglect your ability to get new financing, including home mortgages.  Many times, a counselor will recommend closing healthy credit accounts to stop you from using them, but canceling these accounts is bad for your credit score.  Additionally, lenders don’t like to see that you are having difficulties handing your own finances, and having credit repair services on your record can send up a red flag.

To qualify for a certain type of home loan under the Homeowner Stability Initiative, you might have to sign up for HUD-certified debt counseling program, but otherwise you should stay away from credit counseling before applying for a home loan.  If you really have a spending problem, a better strategy is to put your credit cards where they aren’t easily accessible to you (like a safe deposit box), or even cut them up.  Keep the accounts open, and continue to pay down your balances and make your payments on time.

By avoiding these mistakes, you can help boost your credit score enough to qualify for lower rates, bigger loans, or both!

If you’d like a free consultation to get the best mortgage for your current financial position, drop us a line and we’ll help you out.

8 Reasons Why Now is the Best Time to Buy a Home

Mike Ciucci is joining us today, with excellent advice on taking advantage of this once-in-a-quarter-century buying opportunity that we are experiencing right now.

8 Reasons To Buy a Home Now

If you’ve been straddling the fence about buying a home, you could be kicking yourself when this unique window of opportunity closes. Never in history have the cards beens stacked for the buyer as they are now.

Here are eight reasons that will convince you that NOW is the right time to stop renting and buy your own home.

1. The market is with you. A Buyer’s Market occurs when there are more sellers than buyers, which results in more choices and lower prices due to excess supply. Homes are bought in both Buyer’s and Seller’s markets, but for the purchaser, now is the time they will get the most bang for their buck.

2. Favorable interest rates. As of the week ending April 16, 2009, a 30-year fixed rate mortgage averaged about 4.82 percent. The same time last year, the same mortgage was 5.88 percent. Five-year-Hybrid Adjustable Rate Mortgages (ARMS), were 4.88 percent, down from 5.48 percent a year ago, and the lowest since 2005. Imagine knowing that for the next 30 years, you’ll pay under 5 percent for your mortgage.

3. Foreclosure opportunities abound. Currently foreclosure properties make up about one quarter of all house sales. In California, 55 percent of all closings are lender-owned properties. Banks that do not want to be in the real estate business are dictating the price of homes, and they are anxious to cover their investment and sell. You have to be careful of what you’re purchasing, but the deals are out there.

4. Tax credit for first time buyers. If a buyer has not owned a home in the past three years, and falls in the eligible income range, they can take a tax credit worth 10% of the home’s sale price, up to a maximum of $7,500. This applies to homes that have closed between April 9, 2008 and before July 1, 2009, and can be applied to either the 2008 or 2009 taxes.

The really nice part of this tax perk is that it is a true credit. If you owe $8,500 in taxes, the $7,500 refundable credit comes off the top, leaving an amount owing of only $1,000.

Not only is this a refundable tax credit, but it’s also a loan. This means that within two years buyers must begin paying it back at no more than $500 per year for 15 years. If the home is sold during that time, the amount is withdrawn from the profit. If there is no profit, the loan slate will be wiped clean.

5. The cost of rent is not going down, but house prices are. The cost of buying a house has gone down in most of the U.S., in some areas more dramatically than ever. This drop in price has not affected rent prices, which have remained fairly solid. According to a report from John Burns Real Estate Consulting in Irvine, California, which surveyed 50 percent of the 76 main area markets in the country, the average person can buy a house for less than they could rent one.

6. Solid investment. In this tenuous market of shaky hedge funds and bankrupt financial institutions, it’s good to have an investment that you can feel relatively safe with. Every dollar you pay against your principle goes back in your own pocket when you finally sell, and with some extra added profit to boot.

7. More House for Your Money. With the combined lower prices and record low interest rates, a new buyer can start out with far more house than they could have if they had entered the market four years ago.

8. Today’s Built in Safety Features. Some states, such as California are trying to make it easier for people to invest in a home. The California Association of Realtors have introduced the Housing Affordability Fund’s Mortgage Protection Program. For a house purchased in 2009, if a homeowner is unable to make their payments, the fund will cover up to $1,500/month for six months.

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Work with a qualified, dedicated agent for your Goose Creek real estate purchase. Find the ideal Charleston S.C. home at www.BuyingCharlestonRealEstate.com.

Excellent article, Mike.  This definitely is the smart time to buy.

If you’d like to speak with a Sacramento-area consultant about financing options for you new home, just drop us a line, and we’ll help you get started.