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first-time home buyer

Delays in Store for First Time Homebuyers

Aug 22nd, 2009
by Mike.
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OK, you’ve succumbed to the pressure. You have decided to buy your first home, partially motivated by the $8,000 Federal first time homebuyer tax credit. Sounds like a good deal. Free money for buying a home at a deep discount due to falling home prices and near record low mortgage rates. A slam dunk, right? Maybe.Well, the money is still there, at least until the program expires on December 1st. The problem is you may to wait to receive it.

In order to receive your tax credit, you need to file IRS Form 5405 and amend your 2008 tax return. Unfortunately, due to fraud investigations and more than 1.2 million tax credit requests, the IRS is behind in its processing. This means a 10-12 week turnaround time on your tax credit is now extending to 12-14 weeks. This is not necessarily a problem for everyone. Yes, you may need to pay an extra month’s worth of interest on your credit card for that new furniture, but it is a problem for home buyers who have taken advantage of state programs designed to monetize the tax credit.

The State of Texas introduced a 90-day interest-free loan program offered by some mortgage companies to allow homeowners to advance a portion of that tax credit for use in paying down payment and closings costs. However, that “interest-free” loan tuns into a 10% second mortgage if not repaid within that 90-day time period. Do the math. In order to meet that deadline, you would have to file your 5405 the day of closing and then you still wouldn’t get your check in time to repay the loan.

I spoke with representatives from the Texas Department of Housing and Community Affairs (TDHCA) today and they acknowledged this problem and indicated there were no concessions being made. Essentially they said that the “bridge” loan would not be interest-free, but rather would be a 10% second mortgage loan.

With so many first-time homebuyers flooding the market, there are some unintended consequences such as rising prices in that price segment in Houston, The Woodlands, Spring, Conroe, and Tomball (that’s usually not a bad thing) and delays in the tax credit processing. Don’t let this discourage you too much. You will still get money virtually free, a histoirically low mortgage rate, and have a home of your own to enjoy for years to come.

Advice on Buying a First Home

Aug 20th, 2009
by Mike.
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house and moneyThe residential housing market has always been a bewildering place, especially for those who have never purchased real estate before, and the current lending crisis has only added to the confusion.  Nevertheless, I have found that many first time homebuyers are finding great opportunities now with house prices falling significantly throughout the nation and even in our communities of Houston, The Woodlands, Tomball, Conroe, and Spring.

However, buying a home is still a major commitment, no matter how great of a deal you find. So to avoid regret, here are a few steps I think you’ll find helpful:

  • Work out a Budget. If you currently have a steady job, a decent credit score,  and have some money saved for a down payment, you will have a much easier time applying for and finding an affordable mortgage. Your mortgage lender can assist you with determining what “affordable” exatcly means!
  • Don’t be enticed to borrow more than you can afford. Let me  add “comfortably afford” to that last sentence. It’s always a good idea to leave yourself a cushion for a potential increase in your cost of living, such as food and fuel prices. Also think about what you’ll need for furnishings, any renovation and decoration, and other home-buying expenses. Once again, your mortgage loan officer can assist with determining that last one.
  • Decide what kind of property you need. How many bedrooms are you looking for? Is outside space important to you? Can you handle the maintenence and repairs required of an older home, or do you want a newer one? Make a wish list to help you decide what’s essential and what is just a luxury.
  • Lastly, check with your real estate agent regading trends in your community. In the Houston area, first time home buyers have driven up the prices of entry level homes, so don’t expect to get a deep, deep discount over asking prices.

Houston Housing Market Update – June

Jul 22nd, 2009
by Mike.
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The National Association of Realtors released data on June sales yesterday and the results were mixed for the Houston metro area. While median house prices hit a record high, jumping to $164,500, up from $160,050 12 months earlier, the good news is muted as the volume of sales declined more than 16% over a year earlier. The Woodlands, Tomball, and most of Spring experienced flat to increasing prices while the hardest hit areas included Grimes County, inside Beltway 8 southest of downtown Houston. A decline in the number of sold foreclosures and low mortgage rates helped contribute to the increased prices, however, the expiration of moratoriums on forecloures may result in future housing declines. Homes priced above $500,000 posted the biggest declines in sales volume as sales decreased 20% year-over-year.

As we have stated before, we expect the housing market to remain weak until the later 3rd Quarter or 4th Quarter of 2009 when we expect to see a stabilization. This continues to represent an excellent buying opportunity, particularly for first time home buyers who have access to multiple tax credit and downpayment assistance programs.

If you are interested in seeing pricing trends for the Houston, TX residential real estate market, or price trends for your area, check out the link below:

http://www.chron.com/disp/story.mpl/business/6539800.html

Money Saving Secrets to Buying

Jul 16th, 2009
by Mike.
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applause

Home purchasing is about finding the right house to make your home, and this includes getting the right price. Here are three basic methods to purchase a home for less.

Buy In Inexpensive Cities

Yes, there are still cheap towns that you may actually want to live in. In truth, there are still cities in this country where you can see a good film, put the youngsters in a good college, go shopping, enjoy nearby natural beauty, and buy a great house for less than fifty thousand dollars. If you live in a metropolitan city consider outlying areas.  You might have to commute a little, but that’s a small price to pay for a great price on a house. Generally, the further you move from the epicenter the more property values lower.

Buy A Less Expensive Home

A method to save when purchasing a home is to find a less expensive alternative that still fits your requirements. This may mean purchasing in the cheap parts of the city, or purchasing the cheap types of houses. Don’t set your intellect on one sort of home or one neighborhood before you know what all of the choices are. This isn’t about purchasing an inexpensive dump to economize, or purchasing in a threatening part of the town. It is more about a philosophy of outlining your true wishes so you can find the least pricey way to meet them.  Think about wants VS. needs.  Do you need a 2 car garage or can you find something else? Do you need all that extra square footage or will something slightly smaller be alright? 

Negotiate Aggressively

Getting a lower price irrespective of what you purchase, you are able to save a lot if you know some basic negotiating systems. You will find easy-to-learn and understand systems in any good book on negotiating.  Or hire a real estate agent who has demonstrated these skills for your friends. Is it worth a couple of minutes reading and an hour or two of practice to save possibly thousands of dollars?  I think so.  There are easy negotiating strategies that are employed by the pros of negotiation that will benefit you greatly.

Six Things You Shouldn’t Do Before Buying a Home

Jul 9th, 2009
by Mike.
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family with 2 girlsJust because you’re buying a home doesn’t mean your life has to be put on hold…or does it? You never know what affect today’s actions will have on your mortgage application in three or even six months. Even something as simple as transferring money from your savings to your checking account can create a hassle in the mortgage process.  As a Lender I’ve seen a few of these cause a hold up.  So here are some ideas of things you should avoid before buying a home:

1) Purchasing a Car

For whatever reason, many people are inclined to purchase a car and buy a home at the same time.  Overall there’s nothing wrong with that. However, purchasing the car before buying a home will effect what the mortgage lender determines you can afford as it can greatly raise your debt-to-income ratio.  Wait until after you have purchased your home before taking on additional payments.

2) Moving Money Between Accounts

When the lender is determining your eligibility for a loan, they will want statements from all of your accounts that contain liquid assets. When you move money around between these amounts, especially if they are large amounts, you will have withdrawals in some and deposits in others. The lender will also want the documentation for these. So unless you want to keep up with all this paperwork, it’s much easier to leave the money where it is until after you have closed on the home.

3) Changing Banks

This can easily be coupled with moving money between accounts. It just makes additional paperwork for you and the lender. So to make it easier on both yourself and the lender, stay with your current bank until the mortgage is complete.

4) Becoming Self-Employed or Changing Part-time Jobs

In most cases, lenders want to see at least two years of self-employment before they will approve you for a loan. So if you can, wait until after buying a home to become self-employed. For part-time workers, changing jobs creates unpredictability in the number of hours you will work so the lender cannot determine your gross income to qualify you for a loan.

5) Applying For a Credit Card

Even though the inquiry won’t hurt your credit too badly if you already have a good credit score, the additional credit card will cause the lender to question your financial stability for buying a home.

6) Making a Large Purchase

No doubt you are going to need furniture when buying a home. However, ignore the urge to buy that new sofa set until after you have obtained the mortgage. Big-ticket items purchased before buying a home can cause the lender to take a second look at your financial situation.

Hopefully these few suggestions will help make the loan process easier for you and your lender, and help you get into your new home quicker!

Don’t Make These Mortgage Mistakes

Jul 7th, 2009
by Mike.
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geek boyHome mortgages are a tricky business. It isn’t everyday that you shop for a home, so naturally, I don’t expect you to be an expert with the home mortgage process. However, since a mortgage is such a giant sum of money, I want you to be as prepared as possible. To help you get started, here are some of the bigger mistakes I’ve noticed that homeowners make when applying for a mortgage.

Choosing The Wrong Mortgage. There are many types of mortgages that you can choose from.  They range from fixed-rate mortgages, adjustable-rate mortgages, interest-only mortgages, to balloon mortgages just naming a few. With so many to choose from, it’s easy to make the wrong choice, especially for buyers who aren’t familiar with the advantages and disadvantages of each.

Choosing the wrong home mortgage can be disastrous in some cases. You could find yourself owing the full balance of your home within a few years, or you may find yourself making higher monthly payments when the interest rate goes up. Before you make a final decision about a mortgage, make sure you fully understand the terms, interest rate, and life of the loan. Feel free to ask me as many questions as you need to make sure that you are getting the best loan for you and your situation.

Borrowing With Too Much Debt. Just because a lender approves you for a home mortgage with your current debt load doesn’t mean you should take it. Lenders look at your debt in different ways to determine whether or not to extend a loan to you. Borrowing for a home mortgage when you have too much other debt will put a strain on your finances. When you have too much debt you are at a bigger risk of defaulting on your mortgage, which can lead to foreclosure.

Before taking on a home mortgage, do an internal audit of your current financial situation. Consider all the income and debt you have, and also consider your current employment situation. Ask yourself how much your income increase in the coming years? As a general rule, if your debt is more than 40% of your gross income, you should reconsider purchasing a home until you have decreased the amount of your debt.

Making Too Small A Down Payment. The less you put down on your home mortgage, the more you have to borrow. This ultimately leads to higher monthly payments, and the higher monthly payment may include the cost of Private Mortgage Insurance because your down payment was small.

Fortunately, higher monthly payments can be avoided. Even if you are unable to save up a size-able down payment, it doesn’t mean you have to be put into a financial hold. It is best to save up as much as you can for a down payment and search for a home that is well within your budget and comfort zone.

When it comes to home mortgages, the key is to not bite off more than you can chew. A mortgage is a considerable undertaking, and it’s imperative that you prepare yourself and know what you are getting into.

Homeownership Pros and Cons

Jul 1st, 2009
by Mike.
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handing keys overBefore purchasing my first home, I found myself weighing the pros and cons of what that actually meant. And I think there comes a point in most people’s life when they start to consider the same ups and downs of homeownership. While it may seem like a huge, intimidating expense, it’s important to realize the overall value that comes from taking such a giant step.

From what I’ve experienced, it seems like the main reason people want to own their own home is that it is a great long-term investment. This is very true, and there are four main reasons why: lower taxes, an asset that goes up in value, tax-free profits if you decide to sell, and stable expenses (as opposed to fluctuating rent payments).

But you should also try seeing it this way – even if there were no tax advantages or profits to owning your own home, there is still another great financial reason to buy if you can afford to: you’ll have a solid asset to show for the money you would otherwise be losing toward rent. From this point of view, buying a home is like putting extra money in a savings account.  Not only that but you’ll get to experience the enjoyment and sense of security that owning a home brings.

It’s a Good Time To Buy

Jun 16th, 2009
by Mike.
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row of housesIf you ask me, this is a good time to buy a home providing you can afford it. If we’ve learned anything about the current disaster in the home-buying market, it’s that buying a home you can’t afford will lead to certain disaster. And in this case, the disaster is not only in the families that are being dispossessed, but in the market at large, which affects us all. Some unwise moves on the part of government and lenders have led to a situation that is going to take a very long time to get out of. On the flip side, it may work in your favor since there are lots of bargains in the form of very nice homes right now.

How much can you afford? Be completely realistic here. Don’t get caught up in the fever of owning a home for the first time and make a purchase that will lead not to happiness but disaster. Determining how much you can afford will require a careful evaluation of your entire financial situation including income, credit rating, current monthly expenses, down payment, and interest rate. The best way to figure that out is to talk to a lender. As a lender, I’m prepared to help you work this out even before you start looking for a house.

Shop for a loan. Yes. Shop! Speak with more than one lender. In fact, approaching several is a great idea. Compare costs, interest rates, and negotiate to get the best deal. Getting pre-approved for a loan is a good thing. It means you are all set once you find the house you want. It also means you won’t be making decisions in a hurry and under pressure.

I also suggest you educate yourself about home-buying programs. There are many home-buying programs that can make it easier for you to get into a home, especially if you’re buying for the first time. Look at http://www.hud.gov/buying/index.cfm to find a list of programs in the Houston area that can help. Make sure to look at home-buyer programs specifically in your state.

Anticipating Settlement Costs

Jun 11th, 2009
by Mike.
1 comment

family on couchFor many first-time home buyers, all the fees and extra costs beyond what they are paying for their new house may come as a big shock. So it’s best to know about them upfront to avoid being caught off guard. One of the most common questions asked is, “Do I pay the Realtor?” And the answer to that one is a resounding “No.” The seller pays this cost, and it’s typically a percentage of the selling price. Usually 3% goes to the selling agent and 3% to the listing agent.  However, the following are the responsibility of the buyer:

  • Fees connected to the loan. The lender is going to charge you to process, approve, and make the loan. Some typical ones are an origination fee and the lender’s costs to process the loan. A Loan Discount fee will be required if you want to pay to have the interest rate lowered. You will pay for the appraisal, which is required as well as a credit report fee which the lender paid to get your credit report.
  • The Home Inspection fee. This will be paid by you even if the lender ordered it. It is definitely worth the money!
  • Mortgage insurance application fee. This insurance will cover the mortgage should something happen that you couldn’t pay it and is usually required if you put less than 20% on the home. The assumption fee is required if you are taking over the mortgage of the previous owner.
  • Fees you will need to pay in advance. Interest–most lenders require payment of the interest from the date of settlement to the first monthly payment. Good thing is your first payment will not be due until th2nd month after closing. There’s also the Mortgage insurance premium, which you may need to pay in advance. Also, your lender may require that you pay at least a part of your hazard insurance and flood insurance premiums.
  • Escrow Account Deposits. Taxes, insurance, and other possible items that must be paid at settlement may be set up in an escrow account. The lender is constrained as to the amount that can be collected.
  • Title Charges. These costs are state regulated and standardized.
  • Recording and Transfer Charges. These may be paid by you; sometimes they are paid by the seller. This can be negotiated. You will probably pay the fees for recording the new deed and mortgage. There may be some taxes associated with transfer of title according to where the property is located.
  • Additional Settlement Charges. Your lender may require a survey of the property. In that case, you will have to pay for it. This protects you as well as the lender. In some cases, this is paid by the seller.
  • Pest and Other Inspections. You don’t want to buy your home and find termites have been eating the foundation. This is sometimes paid by the seller.
  • Lead-based Paint Inspections. Particularly relevant if you are buying an older home.

Hope this helps!

Using First Time Homebuyer Tax Credit for Down Payment

Jun 1st, 2009
by Mike.
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First-time homebuyers in Spring, The Woodlands, Tomball, Conroe, and Houston will be better able to utilize the $8,000 tax credit created under the Obama Administrations’s “Making Home Affordable” program. The Department of Housing and Urban Development announced late last week that  borrowers would be able to “monetize” the tax credit for use as additional down payment funds to to offset closing costs on FHA-insured mortgages.  While you will not be able to use the funds to replace the required 3.5% down payment under an FHA mortgage, it does represent a way for many home buyers to tap into this resource, previously only accessed once your house was closed by filing an ammended 2008 tax return.

We are still awaiting additional details, but a home buyer will be able to essentially get an advance of these funds through secondary mortgage financing provided by the FHA or through a non-profit organization. Whether there will be a way to apply this strategy to conventional financing is uncertain, though some states have already provided such a means through state housing authorities.

For the official news release from H.U.D. click this link

If you have additional questions, please feel free to give us a call at (832) 286-1600

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