First time home buyers, you are living in an unprecedented time.  The market is flooded with low cost housing, Congress is trying to think up incentives to lure you into buying these houses and tax breaks and incentives for home buyers abound.  Lucky you!!

However, on a less positive note, most of the zero down mortgages have disappeared from the landscape and they won’t be back for a long time.  You can probably purchase a home today with the equivalent of zero down but note that word “equivalent”.  If you qualify for some of the city, state or federally sponsored first time home buyers programs, you will collect cash either before or after closing on your new home.  In the case of the federal tax credit, you still need the cash to close to collect the credit.

If you have family or friends who are willing to help you out by gifting you money for your down payment, that could help you through the rough patch.  You could accept the “gift” and then make a promise to repay when your tax credit refund arrived.  Be sure to work with a talented and ethical mortgage consultant when purchasing a home.  These folks can track down every dollar to which you are entitled and make creative suggestions for how to bridge gaps that may arise.

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”.

It depends.  Before you go shopping for your first home, you should sit down and answer a few questions as honestly as you can.  Do you have a need for a private yard?  Some people have children and want a private play area; yet others own pets, dogs and cats, and want a fenced-in yard for them.  Yet other folks enjoy working outside, gardening or planting flowers and shrubs for their personal enjoyment.

Do you like doing fix-up projects or redecorating?  Do you have a busy job that prevents you from spending a lot of time at home?  Do you need absolute quiet in the evening?  Do you entertain a lot?  Do you have children or do you have relatives or friends who will share your new home with you?

As you can see, these questions are all about your life style.  The home you purchase should complement that style.  If you’re noisy, townhome life may not be for you.  If you garden or have pets, you won’t be able to control the outside of your home as well as you could if you owned your own lot and a single family home.  If you travel a lot and are too beat when you come home to mow grass and shovel snow, you’ll love townhome living which is more carefree. 

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”.

A HUD home is a foreclosed home which is now owned by the Department of Housing and Urban Development (HUD) of the Federal government.  How did it become a HUD home?  The home buyer used an FHA mortgage to purchase the home.  If you read our blog on FHA mortgages, you remember that these are mortgages which are “insured” or “guaranteed” by HUD.  In other words, the bank lends you the money but HUD assures the bank that in case of foreclosure, HUD will pay the bank any losses that occur.  The bank is insured against default by HUD.

In Minnesota, the process to purchase a HUD home is a little different than purchasing any other foreclosed home.  The process is an auction process.  The rules may vary depending on how long the home has been on the market but briefly, you will be submitting a sealed bid to HUD.  Other buyers may submit sealed bids as well.  If your bid meets the minimum bid requirement established by HUD for this property, AND it also yields the biggest profit of all the bids to HUD, you will “win” the home.  Be sure to work with a Realtor when purchasing a HUD home because the rules are quite different than those used in purchasing other homes.  Both your right to a home inspection and your right to a refund of your earnest money differ for HUD homes.

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”.

This answer may differ from state to state so I am talking about my experience in Minnesota in this response.  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 rather than a 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 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 a 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 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.  It’s 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”.

The first time home buyers $15000 tax credit discussed by the House of Representatives is no more. The compromise plan with the Senate reached on February 11 eliminated the $15,000 homebuyers tax credit, replacing it with an $8,000 credit, only slightly larger than the $7500 tax credit already in place. The final plan which will be signed by President Obama may still change but there will be a tax incentive for the first time homebuyer. Whether the ”credit” is a true credit or an interest free loan, it’s clear that those folks who buy a home this year will have a once in a century opportunity.

 Who qualifies for the federal tax credit?

To qualify for the current program as well as the propsed program, you must be a first-time home buyer who hasn’t owned a principal residence in the three years prior to purchase.  Some time limits apply.  For the current $7500 tax credit, you need to purchase your first home between April 9, 2008 and July 1, 2009.  The new program may extend those timelines to August 1, 2009.  The program targets individuals who earn less than $75,000 per year or couples who earn less than $150,000 per year.  Under this plan, you may also have to maintain ownership of the home for a certain time period.  The final vote is expected to take place this coming weekend in Congress. Come back to our web site for an update on the finalized program next week.

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 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 1.75% of the purchase price and it’s added into the mortgage loan and financed by the bank.  The other 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.  You may be influenced by the home of your parents.   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 payment will then be translated into an approximate house price which will help focus your shopping.

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”.