Setting Expectations

Posted: October 29, 2008 at 4:46 pm

Setting Expectations

 

A wise man once said “Nothing worth doing is ever easy”. If you expect to find your dream home by taking a walk around your block, spotting the perfect house, signing on the dotted line and moving in the very next day, you’re probably on the short road to disappointment.

 

Finding the right home at the right price takes work, lots of it. Buying a home is the single largest and most important purchase most people undertake in their lifetimes.

This is where setting expectations comes into the home buying process.

 

It’s extremely important to know what you want, and to have a realistic idea of how to get there. The average home buyer takes anywhere from three to six months of diligent searching, negotiation, and financial positioning to walk away with a set of keys.

 

Some of the things to think about:

If you’re someone who knows how to do home repair, or has friends or relatives who’ll give you a deal on the work they do, you may be willing to settle for a property in less than perfect condition. Many foreclosures fall into disrepair because their former owners couldn’t maintain the property. If you can’t make your mortgage payment month to month, you’re probably not putting money into keeping up the lawn or fixing that leaky roof.  If you expect the home you move into to be in pristine condition, odds are you’re going to be looking a little longer.

 

In the current financial market, home loans are going to be harder to come by, especially if you have a poor credit history or nothing to put towards a down payment. Save as much towards your down payment as you reasonably can, and pay off as much outstanding debt as you can manage. If you can only do one but not the other, paying off debts in a timely fashion
improves your credit score, giving you more favorable rates on your mortgage, and takes pressure off finding the cash to make those mortgage payments once you are in your new home. If you expect a lender to give you the money to move into a new house with no proof of a job, a shaky credit history, and no money for a down payment, odds are you’re going to be turned down.

 

For the prepared home shopper, the inventory of available property is at its highest level in decades. If you expect to spend some time making phone calls, driving around neighborhoods and making choices about whether you want the house with the cracked chimney within walking distance of the great school, or the great price for the home that means a longer commute, now is one of the best times in recent memory to buy a home.

 

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

 

Need money for a down payment? There are options!

Posted: October 22, 2008 at 3:06 pm

 Buying a home for the first time but don’t have a down payment?  With home prices in the US well into the hundreds of thousands of dollars, coming up with even a 5% down payment can seem next to impossible for most people, especially the first time home buyer looking to obtain a loan.  Well, sometimes it just takes a little creative thinking to come up with the down payment money.

Savings: We’ll start with the easiest first.  If you have money saved in the bank, most people will use part or all of this money for a down payment.  Depleting your savings for real estate will more than likely pay off in the long run as the home appreciates whereas depleting your savings on a new car will have the opposite effect.  As such, don’t be afraid to dip into the savings for the long-term benefits of home ownership

Borrow Money: Many people borrow money for a down payment. They may borrow from a relative, friend or even take a loan from a 401k or 403b retirement plan. If you do decide to borrow the down payment, be sure to review of all the consequences first. For example, if you take a loan from a retirement plan, you should definitely consult a tax professional to understand the consequences.

Furthermore, in these tough economic times, there are websites popping up where borrowers can request funds from others seeking to lend funds for interest.  One such site is www.prosper.com.  There are also plenty of excellent testimonials from successful borrowers on the site that you can review. 

Sell Items on eBay or Craigslist: This is becoming very popular for first-time home buyers.  You’d be surprised how many things you have around the house, or even stuff you forgot you had at your parents’ house! Try taking items you don’t need any more and sell them on eBay to make extra cash for your down payment. You can also try to sell items on Craigslist, which is free and easy way to make some extra cash.  You’ll be surprised at how quickly your list of items grows.

Have a Yard/Garage Sale: Believe it or not, many people have lots of stuff around their home that they no longer need and you can sell it to make a few extra bucks.  Also, by having the yard sale early, you can avoid doing it again before you move into your new house.

Have Someone Give You Money: Ok, some of us may not be this lucky but this may be a legitimate opportunity for others. I guess it cannot hurt to ask a parent, grandparent or other close person in your life if he or she would be interested in giving you a “gift” to use as your down payment. You may have to provide documentation of the gift (usually a signed letter from the gift giver) when you apply for a loan/mortgage to show how you obtained these funds.

IRA Withdrawals: The IRS will allow a one-time withdrawal of up to $10,000 from a Traditional or Roth IRA without penalty if you are under age 59 1/2. Certain restrictions apply, so be sure to check out the IRS website for more information.

Apply for FHA Loan:  Many first-timers turn to the FHA for their first loans primarily due to easier qualifications standards and more commonly for the lower down payment requirements.  With and FHA loan, your down payment can be as low as 3% of the price of the home (only until December 31, 2008 - after that, you’ll need a 3.5% minimum down payment).  So on a $250,000 home, at 3% down, you would only have to come up with $7,500, and for most, that becomes workable.

So as you can see, there are options out there.  Sit down, write them out and methodically go through all of your options to see what you have available.


I hope this helped.

 

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

 

Why buy a home?

Posted: October 1, 2008 at 8:56 pm

 

1. Opportunity to build equity

Aside from having a roof over your head (your own roof), the ability to build equity is one of the most valuable benefits of home ownership. Each monthly mortgage payment you make helps you build equity and brings you closer to owning your home outright. Home improvements that increase the value of your property may also add to your equity. And, if property values in your area rise, which they historically do long term, your equity will too. 

2. Possible appreciation
Most large purchases, like cars, boats or electronics, go down in value as soon as you purchase them and more so as they age. Conversely, a home usually increases in value over the years, especially if it’s been well maintained. And if your home’s value has increased substantially by the time you’re ready to move, you may be able to profit from its higher resale price.

3. Preferential credit options
Once you build up equity in your home, you can benefit from a new source of borrowing through home equity loans and lines of credit, and getting cash-out through refinancing. Home equity loans — loans that are leveraged against the value of your house — are usually offered at a lower interest rate than conventional loans because they represent a lower risk to the lender because the property is used as collateral.  In some cases you may even be able to borrow more than what your home is worth when you want to upgrade your home.
If you manage these credit sources wisely, they can become a valuable source of income for major purchases such as a new car, vacation property, home renovations, a new business, or emergency funds to use in the event of such things as a job loss or unforeseen medical expenses.
However, because a home equity loan is secured with your house, it’s important to never borrow more than you can comfortably afford to pay back. Otherwise, if you miss your payments, the lender could end up taking possession of your home.  Recently, many lenders have tightened their lending polices to assist home owners in keeping their borrowing in line.
4. Tax breaks
Home ownership does require you to pay some extra fees, such as property taxes and interest on your mortgage balance. But fortunately, both of these expenses are usually tax deductible.
Borrowing against your home’s equity may provide a tax break, too. Home equity loans of up to $100,000 are usually tax deductible. In addition, if you’ve used your house as a primary residence for two or more years, you can exclude up to $250,000 (or $500,000 if you and your spouse file jointly) in capital gains when you sell the property. (Check with your financial advisor for advice on your personal tax situation.)
5. Personal freedom and control
As a homeowner, you can often exercise greater control over your housing costs than renters. For example, you may choose to lower your monthly utility bills by reducing your energy consumption. This may not be possible as a renter if utility charges are bound up in your rental payment. Also, when you own your own home, you have more freedom to renovate as you choose without worrying about restrictions set out in a rental agreement. Plus, any upgrades you make may eventually pay off by increasing the resale value of your home. 
6. Pride of ownership
Finally, home ownership has plenty of non-financial benefits, too. When you own a home, it’s yours.  You can do what you want with it in terms of decorating, gardening or renovating or making the choice to have a pet or even a roommate to rent out an extra bedroom.  Do you want to have friends and family over?  It’s all up to you.  Remember, you not only own the house, but the land it sits on. There are few things as empowering as knowing that there’s a piece of the world that you own and are sitting on; a place you can truly call home. 
Discover some great benefits of home-ownership.
This has been Real Estate Rob putting you on the Inside Track to home ownership.