Buying your first home is a big step.  You need two things before you decide to make that purchase.  First, you need to have all your financial ducks in a row.  Make sure you have money set aside for the down payment and that you have some money in reserve for any problems that might come up after you buy your home.  Look at your credit report and see if you need to change or correct it.  Make sure it presents you in the best light possible and that it tells the truth about you.  If there are mistakes or inaccuracies, take the time to get them fixed.

Second, make sure you are emotionally ready.  Buying a home means assuming responsibility for the new home.  It is a big financial commitment and a time commitment too.  When something breaks or needs repair, there is no landlord to call because the landlord IS YOU. 

I advise you to NOT buy a home if you also are planning a wedding or having a baby or changing jobs.  At least provide some time between these events.  Make sure that you are not taking on too much at one time.  All of these events are stressful and cost money.  Home buying should be a pleasant experience but it can become a nightmare if you are under too many time pressures and too many money pressures.

First time homebuyers will find good opportunities year round, but here in Minnesota, fall is especially a good time to shop.  The market is usually a little slower and sellers are delighted to see you visit their home.  Prices tend to be a little softer in the fall and mortgage interest rates usually drop in the fall as well.  However, any time is a good time when you are ready.

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”.

When you make your monthly house payment which repays your mortgage loan, interest will be the biggest part of that payment.  Interest rates make a huge difference in the size of your house payment.  Look at the table below:

5% interest on $200,000 mortgage over 30 years:  principal/interest payment $1074.

6% interest on $200,000 mortgage over 30 years:  principal/interest payment $1200.

7% interest on $200,000 mortgage over 30 years:  principal/interest payment $1278.

So it’s important to qualify for the best interest rates.  Most home buyers don’t know that when you apply for a mortgage, you may not be receiving the best interest rate on your loan.  If your credit isn’t good, the bank will penalize you and quote you a higher rate for your mortgage. 

If you are borrowing money for a mortgage and you don’t have 20% towards the down payment, you will also be paying for insurance on the loan called mortgage insurance.  Your mortgage insurance rate is a percentage of the loan amount divided by the 12 monthly house payments.  It is added into the house payment.  If your credit is poor, the mortgage insurer will charge you a higher rate as well.  Higher interest and higher insurance rates will mean a higher house payment.  It’s worth your while to repair your credit and make sure you qualify for the best mortgage.

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 Insurance is necessary if you buy a home and put less than 20% of the purchase price into the down payment.  Banks believe that if you don’t have a lot of money into the home purchase, you may be more at risk for default on your mortgage.  This makes your loan riskier for them.  To decrease the risk to them, they ask you to buy insurance for them.  Just as there are large companies that sell car insurance and life insurance, there are 4-5 national companies that sell mortgage insurance.  You pay a monthly premium which is included in your monthly house payment.  This pays for the policy.  If you default on your mortgage (stop making payments and go into foreclosure), the bank will be reimbursed for their losses by the insurance company.

Mortgage insurance companies can play a part in your loan approval.  They have criteria for credit and employment that must be met.  The bank knows their criteria.  If your loan doesn’t meet these criteria and it is not insurable, the bank will not give you the loan.  It is simply too risky for them. 

Mortgage insurance premiums can vary according to your credit history.  If you have good credit, your premium may be lower.  If you have less good credit, your premium may be higher.  When you are borrowing your mortgage money, make sure you know the rate your mortgage insurance company is charging you as it will affect the size of your house payment.

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 time is here.  You are finally ready to go buy a home.  What should you do first?  It’s a good idea to meet with your mortgage consultant and discuss your financial situation.  You will need to have a loan preapproval letter from your consultant and they can answer questions about interest rates, house payments, how much you can afford and so on.  It can be a relief to find out how much mortgage you are approved for so that you know what your shopping price range will be.  If you don’t have a loan consultant, consider working with a loan broker rather than a bank based lender.  Brokers sell loans to many different investors (banks) rather than just to one bank so you will get the best price quotes.

Once you have that important loan approval from your lender, contact your Realtor.  Sit down and discuss your wants and needs and be clear about the price that is acceptable to you.  You can do some of your shopping on line and eliminate homes that are too old or too small or too expensive.  Then you need to put on your walking shoes and start touring the homes that are on your list of top prospects with your Realtor.  There is no quick way to check out home interiors and neighborhoods.  You just have to put in the time.  Soon, some homes will emerge as your top picks.

After you’ve found the home of your dreams, your Realtor and loan consultant will work with you to put an offer together and help you purchase the home from the seller.  You can buy a home in as little time as two weeks or as long as two years. You set the pace.  Your housing professionals work with you to keep your schedule.  Good shopping and good luck on finding that great 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 been shopping online for your first house, you must have seen the term “short sale” used in connection with some of the homes on the market.  A “short sale” occurs when the homeowner has less equity in the home than the mortgage amount they owe to the bank.  For example, the homeowner purchased the home in 2005 for $200,000 and in today’s market, it is worth $170,000.  However, the mortgage owed against the home is still at $185,000.  The homeowner is “short” $15,000 to pay off the loan when they sell the home.

Banks will often work with homeowners and reduce the amount they will accept as a final payoff on the mortgage.  They do this because they fear that these homes will end up in foreclosure if they don’t help the homeowner to sell the home.  It is estimated that banks lose about $56,000 on the average across the country, for every foreclosed home.  If they work with the homeowner on a short sale, they might be able to reduce their loss.

However, there is nothing “short” about a short sale.  Because these are non-traditional sales, they take a long time for the bank to process.  A good estimate of time is about 60-90 days.  So you and your Realtor could put together an offer for the seller on April 1^st and you might not hear back from their bank till July 1^st.  Patience is key to a short sale.  Eventually, you will hear back from the bank and there are some good deals out there.

Be sure to work with an experienced Realtor if you are purchasing a home on a short sale.  They are complicated and there are some costly mistakes you could make that an experienced Realtor will prevent.

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’s a great country we live in and you can reap the benefits this year.  Congress has passed a new law which permits first time homebuyers who earn less than $75,000 (individual) or $150,000 (couple) to qualify for a special tax credit.  If you buy your first home (must not have owned a home in the previous 3 years), you can qualify for a gift from your government of up to $8000. 

The tax credit is 10% of the purchase price of the home or $8000, whichever is less.  This credit not only reduces your tax liability for the year in which it is used but also serves as a real credit.  That is, if you don’t pay enough taxes to use the full $8000, the government will mail you a check for the difference.  You could claim the credit this year, even if you have already filed your income tax return by using the new form, Form 9465, to request the credit.

So what are you waiting for?  Home prices have dropped the most they have ever dropped in recorded real estate history, mortgage interest rates are at record lows of 5% and you can get paid $8000 by your government when you buy your first home.  Is this a great deal or what?

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”.