This answer may differ from state to state so I am talking about my experience in Minnesota.  Condominiums or “condos” as they are called look a lot like an apartment.  The typical condo unit is in a building with a centralized entrance, often a security entrance.  Once you are admitted to the building, each floor of the building will have hallways with condo unit entrances off of the hallway.  A condo unit can be on the second or third or seventeenth floor of the building.  Thus, it has no land under it.  This is unusual in real estate and when condos were first introduced, it took awhile for people to accept the idea. 

When you buy a condo, you get two things.  You get private ownership interest in the condo unit and shared interest in the parts of the building and grounds that are shared with all the other homeowners.   The homeowners’ association, of which you are now a member, manages this shared property.   You can do whatever you want to your unit as long as it doesn’t impact any other homeowner and it follows association rules. 

You can’t do anything you want to the shared space unless you obtain permission from the other homeowners.  For example, you can’t change the outside of your door which faces the shared hallway.  Most homeowner associations develop a list of rules and regulations to make sure that all owners respect each other’s rights. 

Usually, the heat in a condo building is central and the costs of heat are included in your homeowner association dues.  Some other utilities might be centralized as well such as garbage removal or water and sewer services.

A townhome most typically will have its own front door.  Usually, that front door faces the outside of the building rather than an internal hallway.  It will stand on a small piece of ground or on its own small lot.  The townhome will typically have its own furnace and hot water heater so you will pay these bills and are responsible to replace these utilities when they wear out.  There still is a homeowners’ association and you still cannot make changes to the outside of the unit without association approval.   Many first-time homebuyers purchase a condo or a townhome first because they tend to be less expensive and less work than owning a single family home.

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.

Yes, you can buy a home with an unrelated adult partner.  Both purchasers will have to qualify for the mortgage unless it is your intent to buy the home on your own, and rent out a portion to the roommate.  If you are going to be a landlord rather than a co-purchaser, you probably will not be able to use the rent you would collect to help you qualify for the mortgage. 

If you are buying the home with someone else, you will want to discuss the following issues with your home ownership partner:

How much is each purchaser contributing to the down payment and closing costs?

How much will each purchaser contribute to monthly house payments and other house related bills such as gas, electricity, water and sewer and so on?

What happens if one of the purchasers doesn’t live up to their bargain?

If one purchaser wants to move and sell, what will be the rules for escaping the mortgage obligation?

When the home is sold, if there is profit on the sale, how will it be split?

It is always a good idea to consult with a real estate attorney when buying a home with an unrelated adult partner.  The attorney can help the two of you put together a legal agreement to cover these and other issues which could come up.  If you plan in advance to cover all options, you both will be protected if your relationship changes in the future.

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.

The short answer to this is “yes”.  Depending on the type of mortgage for which you apply, financial help from blood relatives is permitted.  An FHA mortgage allows your entire down payment to be a gift from a blood relative.  So if your folks or your Grandma or your brother want to help you come up with the cash for a down payment on your first home, they can “gift” you the money.  Of course, there will be rules that have to be followed about how this gift can be made.  A competent mortgage consultant can tell you rules and how to make this happen.

Some conventional loan programs will also permit a gift from a blood relative.   However, once again, the rules for mortgage loans are rapidly changing, especially in today’s recessionary environment, so be sure to work with a lender who stays on top of the details.

If you receive a gift from your family and closing cost help from the seller, you can purchase your first home without spending a dollar from your own pocket.  Isn’t it a great world we live in?

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.

Mortgage money comes from banks, investors and mortgage companies.  However, mortgages differ in how they are insured against default.  Let’s say you are applying for an FHA mortgage.  The money can come from US Bank, Wells Fargo, Residential Mortgage Group, Countrywide Mortgage etc.  The bank’s mortgage will be INSURED by the Federal Housing Administration or FHA. 

This is a government mortgage insurance program which is paid for by fees collected from the Home Buyer.  FHA insures the bank so that if the home goes into foreclosure because the buyers are unable to make house payments, FHA makes good the losses suffered by the bank.  This insurance is why banks will loan you money with only 3.5% down payment, the amount FHA requires for its mortgage loan program.  Banks know they can’t lose money on the loan because it’s insured by FHA.

The home buyers pay FHA an insurance premium collected at closing.  Currently, this is 2.0% of the purchase price and it’s added into the mortgage loan and financed by the bank.  The other mortgage  insurance fee is a monthly premium which is .55% of the outstanding loan balance divided into 12 monthly payments.  So you pay mortgage insurance at closing, when you pay for your new home, and monthly thereafter.  FHA fees and rates are considered very competitive with conventional loan programs.

 For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.

If you listen to the news, read the newspaper or keep in touch with what’s happening on the internet, you’ve undoubtedly heard of the “mortgage meltdown”.  Many people attribute this “meltdown” with triggering our current recession.  What really happened?

Banks relaxed lending standards and permitted borrowers with less than perfect credit to purchase homes.  Briefly, these borrowers didn’t qualify for the best loans with the best interest rates because they had poor credit.  But the banks let them borrow money anyhow.  The loans that these buyers received were loans in which the interest rate could go up substantially one or two years after purchasing the home.  After the interest rates went up, most of these borrowers were unable to keep up with the rising house payments and surrendered their homes to the bank instead. 

Today, these loans are illegal and were outlawed by congress as of May, 2007.  But they have done their damage.  Many banks and mortgage insurance companies suffered huge losses due to mortgage loan foreclosures.  These same banks and mortgage insurance companies have tightened credit standards so that YOU will have a much tougher time qualifying for the loans with the best interest rates.

Credit is EVERYTHING when applying for a mortgage.  If your credit is shaky or needs work, consult with a mortgage lender BEFORE looking for a home.  You may need to do some work to get those credit scores up.  Have the lender pull a copy of your three credit bureau merged credit report with 3 credit scores.  Be informed.  Knowledge is power.

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.

Everyone’s idea of a dream home is different.  Your idea may be influenced by the home in which you were raised.   Perhaps this is your idea of a very comfortable and cozy home.  Maybe you enjoy shopping for homes during the Parade of Homes in February and in September.  The builders’ model homes represent new trends and the most modern of building ideas.  Perhaps you are more practical and have created a list of needs you have…a yard for the kids and dog, an office for your home-based business, a large family room for your fantasy football club, a large kitchen for your gourmet cooking.

When you begin to think about buying a home, three things are important to guide your shopping.  First, find out what you can afford.  Meet with a reputable mortgage broker and get preapproved for your mortgage.  The mortgage consultant will tell you what the bank thinks you can afford.  If it’s too much house payment for you, you can scale it back.  This monthly mortgage payment can then be translated into an approximate house price which will help focus your shopping on affordable homes.

Second, decide where you want to live.  Most Home Buyers consider several things when thinking about cities that fit their needs.  They consider drive time to work, drive time to family and friends, school district quality, and shopping and recreational opportunities in the area.

Third, create a list of the things you require in your first home.  Certainly, everyone wants an attractive home but with so many options available, finding an attractive home is not a problem.  Finding a home that fits your unique life style is more of a challenge.  If you keep these three things in mind, you should be able to find a home that meets your needs and your budget.

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.

If you are actively shopping for your first home, it’s impossible to avoid looking at foreclosed homes.  They represent almost half of the homes on the market in Minnesota.  There are four things to remember when you consider purchasing a foreclosed home:

The owner of the home is a bank.  The bank representative has never lived in the home and will not tell you anything about it.  They don’t know how old the roof is, whether the furnace has had annual service, whether there has been a water leak in the home and if everything in the home works.  In other words, you will receive no information on the home except what you discover yourself.

The personal property remaining in the home is not owned by the bank and they cannot and will not sell it to you.  If there is still a refrigerator, a stove, a microwave, a washer and a dryer, technically they belong to the original home owner and not the bank.  If the home owner chooses, they can come and remove them before closing.  If they don’t come to remove them and they “abandon” them, then you can claim them at the time you move in.

The utilities in these homes may have been disconnected without properly preparing the home.  If the heat has been turned off in the wintertime and the plumbing in the home has not been winterized and treated with antifreeze, the pipes may freeze and burst.  When spring comes and the water melts, it may cause mold to grow in the home.  These homes can cost a lot of money to repair and restore. 

There are usually one or more problems with foreclosed homes that require remedy by the buyer.  These may be big problems (burst pipes, mold, ageing roof) or these may be small problems (missing appliances, doors, kitchen cabinets etc.).  Be prepared to spend some money after closing to restore the home.

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.

Buying a home is not like buying a car.  It’s a lot more complicated and with many more risks for you, the prospective home buyer.  We recommend attending one or more first-time home buyer classes or meeting with a Realtor or Mortgage Consultant who specializes in working with first-time home buyers. 

Your first step then is to locate a class.  Sometimes you will find classes offered through your local community education resource.  Other classes may be offered by government agencies.  Other sources of classes are Realtors and Mortgage Lenders who sponsor them.  Sometimes they will be listed in the housing or home section of your local newspaper or can be found on an information website.

Wherever you go, whatever you do, become educated on how to buy a home.  If you know about the risks ahead of time, you can avoid the most common mistakes made by home buyers.

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.

Many Home Buyers are surprised to learn that in addition to a down payment, they may need to pay other fees at closing, commonly referred to as “closing costs” and “prepaids”.  Closing costs cover three major items:  mortgage related fees, title insurance and title transfer fees and government fees.  The amount of these fees may vary from lender to lender.  The largest part of these fees are the mortgage costs.  A good estimate for closing costs is about 3-3.5% of the purchase price of the home.  

Prepaids include items that must be paid ahead at closing.  In Minnesota, these are property taxes, homeowner’s insurance and interest on the mortgage to the first of the next month.

When you are buying your first home, it may be hard for you to come up with enough money for both a down payment and closing costs.  Many first time Home Buyers ask for closing cost assistance from the Seller.  Most mortgage programs will permit the Sellers to help the Buyer pay for their closing costs.  All you need is the Seller’s consent.  Your Realtor will ask the Seller for this assistance when they write up the contract on your new home.  Asking the seller for closing cost help is very commonly done, especially when buying your first home.

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.

If you’ve googled or binged or yahooed in order to do research on home buying, you know there’s A LOT of information out there….mind boggling amounts of information…contradictory information…confusing information…technically worded information.  What’s a person to do???

Rule Number One:  If it sounds too good to be true, it probably is.

There are a lot of incredible offers out there.  Auction houses promise to sell you a home for $1 or more.  Banks offer astounding mortgage interest rates.  Credit repair services promise to fix your bad credit for a low fee and enable you to get a mortgage.  Nothing good comes cheap.  Use your head.  Check with an expert.  Make sure you know all the fine print in the offer.

Rule Number Two:  If it can’t be explained simply, they are trying to fool you.

Real professionals, both Realtors and mortgage consultants, know how to explain complicated ideas in simple terms.  If you run into a website where you are reading double-talk or which says, “trust us”, beware.  It’s your money and your new home.  Walk away from someone you don’t trust and work with someone you do.

Rule Number Three:  If the costs sound astoundingly low, they haven’t listed ALL OF THEM.

 Homes are more like pieces of custom jewelry than boxes of cereal.  They are all unique and have unique costs as well.  Some websites might have a low-priced home offered on their site in order to attract you to it.  However, the offer may be limited to people with high credit scores or large down payments and they fail to tell you that.  Make sure you get ALL the information before you lock in a loan or buy a home.

The best way to make sure you don’t make a fatal (i.e. expensive) error is to work with a loan consultant and a Realtor who are experienced, honest, and willing to spend time with you to answer your questions and guide you at your pace through the home buying process.  Come to class and find out how to locate the best!!

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.