Home Buying Homework!

The Best Way Home

 

“It’s not far, if you know the way.” Maybe it is an obvious statement but there are some definite steps that will improve your success in buying a home in today’s market.

  1. Know you credit score – the best mortgage rates are available to borrowers with the highest scores. Unless you know what your credit score is at all three major bureaus, you don’t really know what rate you’ll have to pay.
  2. Clean up your credit – it is estimated that about 90% of credit reports have errors. Some are not serious but others could affect a borrower from getting the best loan terms. It is your responsibility to know what is on your different reports and correct them if possible. You’re entitled to a free copy of your credit report each year from Experian, Trans Union and Equifax.
  3. Get pre-approved – Taking the time to make a loan application with a qualified lender even before you start looking at homes will provide peace of mind, make sure that you are looking at the “right” homes and may help you negotiate the best price on the home you select.
  4. Do your homework – when you find the home that meets your needs and desires, research the tax assessments, school ratings, crime activity, possible zoning changes and comparable sales in the area.

As your real estate professional I can definitely help you with these important strategies to invest in a home to call your own, raise your family, feel safe and secure and share with your friends. Call for a recommendation of a trusted mortgage professional; there really is a difference.

Waiting To Buy Might Cost MORE!

 

 

The housing market has been in a downward trend for four years. There is some speculation that inventories will not reduce any time soon which will be necessary for prices to rise.  Texas and Austin, in particular, have been spared the worst. However, there are other factors that can increase the cost of housing, specifically mortgages. FHA accounts for a large percentage of the current housing loans and is expected to be even more prominent when the Qualified Residential Mortgage Guidelines go into effect next year.

  1. Rising rates are almost certain, due to looming inflation fueled by higher gas and food prices and the enormous amount of deficit spending
  2. FHA loan limits have been reduced – they are lower than conventional limits in most markets and FHA has suggested that they might be reduced further.
  3. FHA might increase the down payment to 5% or higher in an effort to have a more secure loan that will have less likelihood of going to foreclosure.
  4. FHA might decrease the amount of seller contributions in a similar move to require the buyer to have a larger investment in the home and therefore be a more “qualified” borrower.
  5. Congress may decide to increase the up-front MIP to build up the FHA reserves. The annual MIP has been adjusted twice since October 2010 when the Up-Front MIP was actually reduced.
  6. Due to tougher conventional requirements, demand for FHA loans could exceed maximum annual insurable limits. If Congress is having a hard time raising the limit on national debt, they might not even consider raising the limits for FHA.

In an effort to solidify the lending industry, qualifying is becoming harder for the buyer and more expensive at the same time. Many of the rules changes could go into effect next year. In addition, market factors could easily play a role in increasing buyer’s costs. Waiting will very probably require a larger up-front investment for buyers in the future.

One Size Does Not Fit All!

 

One Size Doesn’t Fit All

Rarely, does one size fit everyone and the same goes for advice. The following suggestion is not right for everyone. However, for people with job security and who don’t own a home; for people with good credit and enough savings for a down payment, there may never be a better time to buy a home.

 

Homes have had a significant price correction but in many markest, they have started to rise again. The lower prices combined with historically low interest rates make this an opportune time to buy a home if you can afford it.

One of the reasons homes are an attractive investment is that fact that you can use a small down payment and finance the balance for 30 years. The principle, called leverage, allows you to earn a return on the value of the home rather than the actual cash investment. Small appreciation can create a large rate of return on the initial investment of the down payment and closing costs.

The following example is a projection at the end of five years for a $175,000 home with 3% closing costs and a 5% interest rate for a 30 year term. The rate you see in each column is an annual rate of return based on the equity of the home at the end of the five year period due to both appreciation and amortization of the loan.

 The nature of positive leverage will cause the returns to be higher with a smaller down payment. As you see in the table, the return is higher on the 3.5% down payment than with the 10% or 20% down payment.

If you’re curious to see if this advice might fit your situation, you really need to sit down with a knowledgeable real estate professional who can help you assess your position. It’s worth the time because there may never be a better opportunity than now.

Family and Friends’ Mortgages

It all seems perfectly reasonable: one person is not satisfied with what he can earn currently in the market and another wants to find the most attractive mortgage to purchase their home. It can be a good match but the IRS has specific rules that govern the transaction.

The loan must be done in a business-like manner with a written note specifying the loan amount, interest rate, term and collateral. IRS requires that the mortgage be a recorded lien in order to allow the interest deduction.

Sometimes, these friends and family situations have a less than normal interest rate on the mortgage. However, the rate charged in the note is regulated by the minimum applicable federal rate which is published monthly by IRS according to current Treasury securities. For October 2011, the rate is 2.95% for terms over nine years.

The seller must report the interest paid to them along with the name, address and Social Security number on schedule B when the buyer uses the property as their principal residence.

A mortgage between family and friends can be good for both parties. It may allow the borrower a slightly lower rate without the expenses of a traditional lender while giving the note holder a higher rate than they can earn in available investments. Your tax professional can guide the transaction whether you’re a buyer or seller and your real estate professional can help arrange to have the documents drawn and filed.

Real Estate Update, Affordability Driving Buyers Market

buying real estateExamining the nation’s real estate uncovers that people buying real estate are doing so because of the incredibly high affordability levels. While mortgage rates have been dipping and rising in recent weeks, housing prices have continued to drop, if ever so slightly in comparison to a year or two ago. The high inventories in most markets are keeping prices from rising and sellers are forced to swallow the fact that if they want to sell they have to do so for less than originally thought.

Low home values, low mortgage rates and high inventories have created an ideal time to buy real estate. These are the best affordability levels with respect to real estate that have been seen in years and those buying are the people who do not want to look back in a few years and think if only I had bought then.

The best investments are those that are timed right. Buying low and selling high is the motto, and those that can get it right are those that stand to make the most profit over time. In a nutshell, there couldn’t be a better time to be a real estate investor.

SourcedFrom Sourced from: Kinetic Content Library