In addition to the housing tax credit for first-time homebuyers, the “Housing and Economic Recovery Act of 2008,” includes a couple of other housing programs that you may be interested in if you’re in the market for a home:

Affordable Housing Programs

The legislation calls for a creation of a permanent Housing Trust Fund (funded primarily by Fannie Mae (Federal National Mortgage Association) – FNMA and Freddie Mac (Federal Home Loan Mortgage Corporation – FHLMC)).
One of the mandated purposes of the Housing Trust Fund is to provide grants to States “to increase homeownership for extremely low- and very low-income families.”

Emergency Assistance for the Redevelopment of Abandoned & Foreclosed Homes

The legislation allows the U.S. Treasury to appropriate $4 billion for assistance to States and units of local government for the redevelopment of abandoned and foreclosed homes.
One of the eligible uses of the amounts made available under this provision is to “establish financing mechanisms for purchase and redevelopment of foreclosed upon homes and residential properties, including such mechanisms as soft-seconds, loan loss reserves, and shared-equity loans for low- and moderate- income homebuyers.”

Keep an eye out for special housing programs that will become available in your area as the funds appropriated under these provisions are allocated to the States and local governments.

This has been Real Estate Rob putting you on the Inside Track to home ownership.

Finding a home in itself is a daunting task but the added stress of determining what the best mortgage is for the home is a headache in itself – but a necessary one. Especially for first-time home buyers, this is particulary freightening but it doesn’t have to be so if you’re prepared and have done a little homework. Buying a home should be an enjoyable expericence and can be if you are prepared. It’s like anything in life; if you’re knowledgeable about the topic you have confidence. And when you’re confident, it’s easier to have fun.

Step 1: Fix Your Credit

The first step should be fixing your own credit. This will allow you to qualify for a lower interest rate. Obtain copies of your credit report and clean up any discrepancies. Allow a few months for everything to be cleaned up. While you are waiting, get rid of as many bills as you can. This allows you to borrow more money, and, better yet, it frees up more money for you so that you know you won’t be “house poor” when you move into your new house.
Meanwhile, if you haven’t already, subscribe to a foreclosure listing service and begin looking at the homes to give you a good idea of what’s out there. With foreclosures you may even be able to get one below market value. They can be excellent opportunities.

Step 2: Get Pre-approved for a Loan

Many first-time borrowers start looking for a house before they are financial preapproved. Prequalified is different than being preapproved. Pre-qualification is where a lender tells you how much money you probably can borrow based on how much money you make, how much debt you already have and how much cash you have for the down payment.
Preapproval is a much more rigorous process and involves actually applying for a loan. You need to submit tax returns, pay stubs and other information. The lender verifies the information and checks your credit. If all goes well, the lender agrees in writing to make the loan.
This is an important step you should take first, as not only will you know what you can afford, you will be taken more seriously when you make an offer on a house.

Step 3: Look Into First-Time Buyer Programs

Most states and even cities offer first time home buyer programs and it is up to you to find them. Don’t expect your Realtor or lender to do it for you. Also, if you are a Veteran, the Dept. of Veterans Affairs will send you information on buying a house with little or no down payment and help you get a guaranty loan that will save you money. In addition, there are agencies like Fannie Mae and the FHA with excellent programs to help responsible first-time home buyers.

Step 4: Borrow within Your Means

Many people take out the biggest loan they possibly can because the lending company says they can afford it. You know what you can afford more than the lending company and it is your responsibility to not overextend yourself. When you do the math for the payments on the house, don’t forget to account for property taxes and insurance. Plus, you will be paying a water bill for the first time and your electricity bill will probably be higher, too.
Knowing exactly how much you can afford could save you from foreclosure.

Step 5: Shop Around

Shop around for rates and terms; this falls in line with getting preapproved. Many times, Realtors will pick out a lender for you and you get caught up in the process and don’t shop around.
Beware of subprime loans which are more profitable, so less ethical mortgage brokers may push them.
Educate yourself on knowing what your prevailing interest rates are for someone with your credit. A comprehensive listing of prevailing rates and fees can be found on the internet through sites such as www.bankrate.com.
And don’t forget about applying for a loan from your own bank. Even people with a few dings on their credit can often qualify for better loans offered by private-sector lenders.

Step 6: Avoid Junk Fees

Be aware of junk fees that lenders add on to mortgages. Some may be legitimate, some may be inflated and others are fluff. A lender may charge $250 for a credit check that cost them $15. Try to negotiate with them and see if you can get these fees reduced. If they won’t, then go to another lender with their estimate and see if they can beat it. Just like when you negotiate for the price of a car you can do the same when negotiating for a loan. If a fee is higher than your last estimate, ask about the interest rate, the points charged to get that rate, any other fees the lender charges, and whether the lender will reduce their fees.
Note that you will have to pay some junk fees when it comes time to sign the loan, but you should have them reduced as much as possible and will feel better that you did the best you could.
Unfortunately, the federal government has done little to prevent junk fees.

Step 7: Prepare for Fees

Closing day can be nerve racking enough, so be prepared to come up with even more money. You’ll also be expected to write a check for a number of expenses, which typically include attorney’s fees, taxes, title insurance, prepaid homeowners insurance, points and other lenders’ fees. Your lender or Realtor will have a legally required Good Faith Estimate of what that is going to be and can help you prepare for the amount.

Step 8: Set Money Aside for Emergencies

And lastly, don’t forget that you will need some money to move and to have your utilities turned on. Although it is not part of the mortgage process, be prepared for an emergency, like a broken dishwasher. Being prepared will help you feel more secure with your new house so that you can actually enjoy being a new home owner. You can also look into getting basic home warranty insurance to cover appliances and your home’s systems.

Happy home hunting and “Get on the Inside Track.”

This has been Real Estate Rob putting you on the Inside Track to home ownership.

Mortgage 101

With so many types of loans out there it can be difficult choosing the right one for your needs. While each has their advantages and disadvantages, it’s important to select the right one for your particular situation with the help of a loan specialist. They are paid to help you sort out the differences and ultimately arrive at one that suits your unique buying opportunity. Some of the most common mortgages available today include fixed rate, adjustable rate, and balloon. There are others, but understanding these will help you “Get on the Inside Track.”

Fixed-rate mortgage: One of the most common mortgages is the fixed rate. It lets a homeowner know exactly what the payments will be during the length of the loan, often 30 years, but sometimes 25, 20, or 15. The fixed-rate is a good choice when interest rates are low and if you expect to live in the house for several years. Because the interest rate never changes, the monthly principal and interest payment never change either.

Adjustable-rate mortgage: The adjustable-rate mortgage (ARM) is geared to homeowners who want to start with relatively low monthly payments. ARMs come with interest rates that fluctuate over the life of the loan. They begin with a relatively low interest rate and then the interest rate is readjusted at agreed upon intervals, typically increasing no more than a maximum of 2% in any one year and 6% over the length of the loan.

Balloon mortgage: This type of mortgage may be a good choice for homebuyers who don’t expect to own their home past the maturity date of the balloon note - five or seven years. Monthly mortgage payments are based on a 30-year schedule, but the entire mortgage balance becomes due at the end of the five or seven year term. If you decide to stay, however, you may be able to reset your interest rate for the remainder of the mortgage period.

There are so many resources out there that will provide you even more knowledge when it comes to home financing. “Getting on the Inside Track” is all about seeking out the knowledge and applying it to your situation.

This has been Real Estate Rob putting you on the Inside Track to home ownership.

There are no short cuts to “Getting and Staying on the Inside Track” when buying a home. Since it’s the largest investment most people ever make, this is not the time to be hasty in decision making. You must take the necessary steps to prepare properly and avoid the common mistakes many home buyers make.

Below is a list of the Top 10 mistakes that we see buyers make. Often times, buyers give in to temptation and try to skip steps to save time or money. Sometimes you may get a way with a few short cuts, but when there is a mishap, often times it’s a very costly one.

1. Doing it alone. Buying a house is a complex transaction. Even if you don’t use an agent, you’ll need a complete, dependable team: lender, lawyer, inspector, insurer, as well as referrals and advice from friends and family. Seek out the help of these individuals early in the buying process.
2. Buying at first sight. You may be in love with the place, but does it fit your family’s needs and budget? Make a list of your needs and wants and make sure the house fits your requirements. Check out the neighborhood and the community before you buy by visiting at different times of the day and week to learn about noise and traffic patterns. Even if you don’t have kids, check out the local schools to make sure your resale value will be good.
3. Not getting pre-qualified and pre-approved. Being pre-qualified gives you a general idea of how much you can afford to borrow. Being pre-approved means a lender has verified your information and credit rating and agreed to provide you with an amount to fund a home. You are in a better position to go house hunting knowing exactly how much you can afford and that you have financing.
4. Overbuying. You may qualify to borrow more, but can you afford to? Analyze your monthly costs: debt, food, transportation, entertainment, and savings. As a general rule, your total monthly debts, including your mortgage, should not exceed 36 percent of your income before taxes. Be sure to budget enough to cover closing costs (often two to five percent of the home’s purchase price), plus moving, redecorating and maintenance. Allow for increases in ongoing expenses such as utilities and taxes. A little cushion here never hurts.
5. Misplacing your trust. No matter how much you like the agent, sellers, inspector, or the guy at the grocery store who vouches for them, remember this is a business transaction and your decision is binding. Do your own research and know your support team’s roles and responsibilities. In real estate, “Location, Location, and Location” are important words, but so are “Knowledge, Knowledge, and of course…Knowledge.”
6. Relying on oral agreements. Get it right and get it in writing. Written agreements almost always trump oral ones when it comes to contracts. If the offer says the Jacuzzi in the back yard is negotiable, but the agent says it’s definitely included, get it in writing. Another piece of advice here is to be bold and assertive. Don’t be afraid to ask for something you want. This is your house and you are the one paying for it. Oftentimes buyers are afraid to ask for things and end up paying for it later. Real estate players expect to be asked questions and you should expect them to provide the solutions.
7. Skipping the fine print. You need to understand what you’re signing before you pick up a pen. Ask for documents in advance, make time to read them and ask questions. Get copies of your mortgage papers a few days ahead of closing. Your home documents are quite an extensive pile and it will take you a lot of time to sign all the necessary ones let alone read through them. You should, however, read through them so you understand what they mean and can avoid any fine print mistakes that may be present.
8. Paying too much. Avoid buying a home that costs 50 percent more than neighboring homes and think before buying the most expensive home on the block. Your neighbors’ lower home values will weaken yours. Remember, markets change. If you buy intending to flip (turn around and resell) your investment and the market falls and you have to sell, your selling price may not be enough to even cover your mortgage.
9. Making an unconditional offer. Protect yourself with at least two of these contingencies in your written offer:
   • Mortgage financing - You’re pre-approved, but is the house? Before a bank will lend you money, it will want a formal appraisal of the property to confirm that there is sufficient equity in it to warrant the loan. If the house appraises lower than the sales price, the loan may be declined.
   • Inspection - Never buy an existing or new home without a thorough home inspection. Walk through the home with the inspector to learn more about the house and any concerns he or she may have.
   • Insurance - Confirm you can get adequate coverage. In some areas, it’s difficult to get hazard insurance.
10. Having buyer’s remorse. No place is perfect. There will always be surprises. Don’t let a few initial blips spoil the entire experience. And don’t miss a great house waiting for the perfect one! Once you’re settled in and have personalized your place, the pride of home ownership soon overshadows a few minimal dislikes that you are experiencing.

“Get on the Inside Track” and avoid one of these common mishaps.

This has been Real Estate Rob putting you on the Inside Track to home ownership.