Buying Your First Home

Buying Your First Home

Published By Yahoo Finance

Finding the right first home starts with a price range and a short list of desirable neighborhoods. But there are many other factors you'll need to consider before investing in what may be your biggest asset.

Topics

1.Buying Your First Home
2.How Much Mortgage Can You Afford?
3.Costs of Buying a Home
4.Ongoing Costs
5.Choosing a Neighborhood
6.Finding a Broker

1. Buying Your First Home. Home ownership is the cornerstone of the American Dream. But before you start looking, there are a number of things you need to consider. First, you should determine what your needs are and whether owning your own home will meet those needs. Do you picture yourself mowing the lawn on Saturday, or leaving your urban condo for the beach? The best advice is to look at buying a home as a lifestyle investment, and only secondly as a financial investment.

Even if housing prices don't continue to increase at the torrid pace seen in recent years in many areas, buying a home can be a good financial investment. Making mortgage payments forces you to save, and after 15 to 30 years you will own a substantial asset that can be converted into cash to help fund retirement or a child's education. There are also tax benefits.

Like many other investments, however, real estate prices can fluctuate considerably. If you aren't ready to settle down in one spot for a few years, you probably should defer buying a home until you are. If you are ready to take the plunge, you'll need to determine how much you can spend and where you want to live.

2. How Much Mortgage Can You Afford? Carlos Salinas Mortgage Loan Officer and REALTOR® at RealEstateMagician.net can help YOU with this, just email & ask for a 2 Minute PreApplication. Many mortgages today are being resold in the secondary markets. The Federal National Mortgage Association (Fannie Mae) is a government-sponsored organization that purchases mortgages from lenders and sells them to investors. Mortgages that conform to Fannie Mae's standards may carry lower interest rates or smaller down payments. To qualify, the mortgage borrower needs to meet two ratio requirements that are industry standards.

The housing expense ratio compares basic monthly housing costs to the buyer's gross (before taxes and other deductions) monthly income. Basic costs include monthly mortgage, insurance, and property taxes. Income includes any steady cash flow, including salary, self-employment income, pensions, child support, or alimony payments. For a conventional loan, your monthly housing cost should not exceed 28% of your monthly gross income.

The total obligations to income ratio is the percentage of all income required to service your total monthly payments. Monthly payments on student loans, installment loans, and credit card balances older than 10 months are added to basic housing costs and then divided by gross income. Your total monthly debt payments, including basic housing costs, should not exceed 36%.

Many home buyers choose to arrange financing before shopping for a home and most lenders will "prequalify" you for a certain amount. Prequalification helps you focus on homes you can afford. It also makes you a more attractive buyer and can help you negotiate a lower purchase price. Nothing is more disheartening for buyers or sellers than a deal that falls through due to a lack of financing.

In addition to qualifying for a mortgage, you will probably need a down payment. The 28% to 36% debt ratios assume a 10% down payment. In practice, down payment requirements vary from more than 20% to as low as 0% for some Veterans Administration (VA) loans. Down payments greater than 20% generally buy a better rate. Lowering the down payment increases leverage (the opportunity to make a profit using borrowed money) but also increases monthly payments.


How Much Home Can You Afford?
Carlos Salinas Mortgage Loan Officer and REALTOR® atRealEstateMagician.net can help YOU with this, just email & ask for a 2 Minute PreApplication.

Bob and Janet's combined income is $50,000 a year, or $4,166 a month. Their housing expense ratio of 28% yields a monthly maximum of $1,166 for mortgage, insurance, and taxes ($4,166 x 0.28 = $1,166).


Their total debt ceiling of 36% is $1,583 (4,166 x 0.36 = $1,500). Their monthly debt payments include a $200 car payment, credit card payments of $100, and student loan payments of $200. Subtracting this total of $500 from the $1,500 permitted leaves $1,000 in monthly housing payments.

3. Costs of Buying a Home. Many home buyers are surprised (shocked might be a better word) to find that a down payment is not the only cash requirement. A home inspection can cost $200 or more. Closing costs may include loan origination fees, up-front "points" (prepaid interest), application fees, appraisal fee, survey, title search and title insurance, first month's homeowners insurance, recording fees and attorney's fees. In many locales, transfer taxes are assessed. Finally, adjustments for heating oil or property taxes already paid by the sellers will be included in your final costs. All this will probably add up to be between 3% and 8% of your purchase price.

4. Ongoing Costs. In addition to mortgage payments, there are other costs associated with home ownership. Utilities, heat, property taxes, repairs, insurance, services such as trash or snow removal, landscaping, assessments, and replacement of appliances are the major costs incurred. Make sure you understand how much you are willing and able to spend on such items.

Condominiums may not have the same costs as a house, but they do have association fees. Older homes are often less expensive to buy, but repairs may be greater than those in a newer home. When looking for a home, be sure to check the actual expenses of the previous owners, or expenses for a comparable home in the neighborhood.

5. Choosing a Neighborhood. Before you start looking at homes, look at neighborhoods. Schools and other services play a large part in making a neighborhood attractive. Even if you don't have children, your future buyer may. Crime rates, taxes, transportation, and town services are other things to look at. Finally, learn the local zoning laws. A new pizza shop next door might alter your property's future value. On the other hand, you may want to run a business out of your home.

Look for a neighborhood where prices are increasing. As the prices of the better homes increase, values of the lesser homes may rise as well. If you find a less expensive home in a good neighborhood, make sure you factor in the cost of repairs or upgrades that such a house may need.

6. Finding a Broker. If you are a first-time home buyer, you will probably want to work with a broker. Brokers know the market and can be a valuable source of information concerning the home buying process. Ask lots of questions, but remember that most brokers are working for the seller, and in the end, their primary obligation is to the seller and not to you. An alternative is a so-called buyer's broker. This individual does work for you, and therefore is paid by you. Seller's brokers are paid by the seller.

Make sure that the broker has access to the Multiple Listing Service (MLS). This service lists all the properties for sale by most major brokers across the country. Brokerage commissions average 5% to 7% and are split between the listing broker and the broker that eventually sells the home. Don't be surprised if your broker is eager to sell you their own listing since they would then earn the entire commission.


Home Buying Costs


Down Payment 0% - 20% of purchase price


Home Inspection $200 - $500


Points $1,000 and up for 1% - 3%


Adjustments 3% - 8% of purchase price

Once you've determined a price range and location, you're ready to look at individual homes. Call Carlos Salinas Mortgage Loan Officer and REALTOR® at RealEstateMagician.net can help YOU find your new home.
Remember that much of a home's value is derived from the values of those surrounding it. Since the average residency in a house is seven years, consider the qualities that will be attractive to future buyers as well as those attractive to you.

Although it can be difficult, try to remember that you will probably want to sell this home someday. The more research you do today, the better your decision will look in the years to come.

Summary

Buying a home can mean building significant value through the years.

Prequalifying with your lender is a good way to determine how much house you can afford.

You will need cash for a down payment and closing costs. Generally speaking, the higher the down payment, the lower the interest rate and monthly mortgage payment.

In addition to your mortgage payments, you will also need to consider the other costs of home ownership.

Schools, taxes, services, crime rates, transportation, and zoning are important considerations when selecting a neighborhood.

Brokers usually represent the seller, but they can be valuable sources of information for buyers as well. A broker that belongs to the Multiple Listing Service will be able to offer a wider variety of homes to choose from.

Remember to consider resalability when buying your home.

Are you a first time home buyer? Carlos Salinas Mortgage Loan Officer and REALTOR® at RealEstateMagician.net can help YOU through every step of the way. So, don't wait call or email me now.

$6,500 Move-Up / Repeat Home Buyer Tax Credit at a Glance

$6,500 Move-Up / Repeat Home Buyer Tax Credit at a Glance

*To be eligible to claim the tax credit, buyers must have owned and lived in their previous home for five consecutive years out of the last eight years.

*The tax credit does not have to be repaid unless the home is sold or ceases to be used as the buyer’s principal residence within three years after the initial purchase.

*The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $6,500.

*The tax credit applies only to homes priced at $800,000 or less.

*The credit is available for homes purchased after November 6, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, the home purchase qualifies provided it is completed by June 30, 2010.

*Single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

Carlos Salinas
"Real Estate Magician" or LOANS at REMagician.com

$8,000 First-time Home Buyer Tax Credit at a Glance

The $8,000 tax credit is for first-time home buyers. For the tax credit program, the IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase.

*The tax credit does not have to be repaid unless the home is sold or ceases to be used as the buyer’s principal residence within three years after the initial purchase.

*The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.

*The tax credit applies only to homes priced at $800,000 or less.

*The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.

*For homes purchased on or after January 1, 2009 and on or before November 6, 2009, the income limits are $75,000 for single taxpayers and $150,000 for married couples filing jointly.

*For homes purchased after November 6, 2009 and on or before April 30, 2010, single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

Carlos Salinas
"Real Estate Magician" and LOANS at REMagician.com

Details on the NEW First Time Home Buyers Tax Credit

Details on the NEW First Time Home Buyers Tax Credit

Here is a simple explanation of the First-Time Home Buyer Tax Credit that is part of the Stimulus Package that was just signed by President Obama.

Essentially, first-time home buyers within certain income limits who purchase a home in 2009 before December 1, 2009 will receive a tax credit of up to $8,000.

· To qualify as a first-time home buyer as defined in the programs, the purchaser (and the purchaser’s spouse) may not have owned a home in the three years prior to the purchase date of the home. Single family homes qualify for the program. The home must be the primary residence.

· The tax credit is subject to adjusted gross income limitations as follows: $8,000 tax credit for AGI of less than $75,000 if single or less than $150,000 if married filing jointly; phased out for AGI up to $95,000 single/ $170,000 joint.

· The amount for the credit is the lesser of 10% of the home purchase price or $8,000.

· The $8,000 tax credit will not be repaid unless the home is sold within the first three years. If sold, the full amount of the tax credit must be repaid upon sale.

· The $8,000 tax credit does not restrict a purchaser from utilizing state/local revenue bond money to help finance the home purchase.

The program is similar to the $7,500 tax credit which applied to home purchases made in 2008 after April 9. Some differences are noted below:

· While a purchaser still owns the home, the $7,500 credit must be repaid in equal payments over a period of 15 years, starting with the 2010 tax filing.

· Upon sale of the home, any portion of the $7,500 credit not yet repaid is due in full.

· The $7,500 credit was not available to any purchaser utilizing state/local revenue bond money to help finance the home purchase.

· Under both the $7,500 and the $8,000 programs, the credit may be applied to the purchaser's 2008 income tax return. Any tax refund monies due the purchaser(s) will be sent as an IRS refund.

I hope this information helps. It's time to get the word out to purchasers who qualify for the tax credit that NOW is the time to buy! CALL ME!

Carlos Salinas
Real Estate Magician