Buying Your First Home
First Things First
If you are making a particular meal for the first time, it is essential to have a recipe so that it turns out the way it should. Knowing the ingredients and preparation can guide you through the process.
Buying a home is really no different than making a new recipe. There are certain things that need to be done, many of which should occur in a particular order to save time, money, effort and disappointment.
Your first inclination may be to start searching the Internet for homes and schedule some showings or possibly visit open houses. Even though this is very gratifying, it shouldn’t be done until you have gone through the preliminaries.
Buying a home for the first-time implies you haven’t been through the process before and even though, you may have a rough idea of what needs to be done, selecting the right agent in the beginning will give you the benefit of years of personal and professional experience that can help you avoid some of the common mistakes made when buying a home.
This agent can direct you to find the other team members that are required like the lender, title company, inspectors and others. Each member of the team has an important role to play that if not done correctly, could cause delays and possibly, jeopardize the transaction.
An important step is getting pre-approved so that you’ll know exactly what price mortgage and home you’ll qualify for. This may even allow you to lock-in a mortgage rate before you contract for a home. The pre-approval could also prove very helpful in negotiating with the seller by removing some of the doubt in their mind regarding an unknown buyer. Another advantage to pre-approval is that if you are competing with multiple offers, you have the advantage of being more of a known commodity.
You’ll need to assemble some documents for the lender including pay stubs from the past two months, W-2’s from last year, proof of additional income, tax returns for the past two years, bank statements for the last three months, list of all open credit accounts and balances, copy of driver’s license and history of residence for past two years.
Buying a home is one of the most important decisions in your life and it should be done with care and research. When all the things are done in the right order, finding the “right” home is just like following a recipe. For more information, download this Buyers Guide that includes great information to help you through the process.
If you would like any professional residential Real Estate advice, contact us at Paramount Real Estate Services. 1008 12th St. SE Salem, OR 97302 503-851-1645
Also, to mobilize us right away to help you move, visit us here:
Is it Time to Buy?
It’s Worth Digging a Little Deeper
There are hundreds of thousands of people who believe, for one reason or another, they cannot afford to buy a home currently. Some people may not for any number of reasons but it would be very surprising to know how many who can buy but have gotten some bad information along the way. It’s worth digging a little deeper to find out the facts.
John and Karen have been renting a home for the last five years at $2,000 a month. During that time, the value of the home they were renting went up by $30,000 in value while the unpaid balance decreased by $18, 400. Even though they were fortunate enough the rent remained constant over the five years, they missed out on close to $50,000 of equity that the owner realized instead of them.
Another thing to consider with today’s low interest rates, it is quite common for a mortgage payment to be lower than a tenant is paying rent for a similar property. So, in this example, John & Karen paid more to rent than a house payment would have been and missed out on the equity build-up that occurred due to appreciation and amortization.
The simple fact is when tenants like John and Karen pay their rent, the landlord is the beneficiary of the rent received as well as the equity earned. Over time, the rent paid by John and Karen and other tenants will pay for the landlord’s rental. It a great concept and a good investment.
True, not everyone can afford a home. A buyer needs money for a down payment and closing costs. They also need to have income and good credit to qualify for the mortgage. Some of these may seem insurmountable but instead of imagining that buying a home is not in the cards at the current time, talking to a real estate professional is a better route to take.
There are lots of low-down payment mortgages available including 100% financing for qualified veterans and USDA eligible buyers. It is sometimes more difficult to find sellers willing to pay all or part of a buyers closing costs when inventory is low, but lenders do allow it. It is a matter of finding the willing seller.
The source of the down payment could be a gift from a family member as long as there is no repayment expected. It’s amazing how many parents or grandparents might be willing to help a relative get into a home. Funds for a down payment may be available as loans or withdrawals from qualified retirement programs like IRAs or 401k plans. It’s worth investigating based on what retirement programs you have.
Good credit is necessary to qualify for a loan but buyers should not assume that theirs is not adequate. A trusted mortgage professional can assess a situation and may be able to suggest some things that will not only raise the score enough to be approved but possibly, even raise the score enough to qualify for a better interest rate.
There are a lot of misunderstandings about whether a person can or cannot qualify for a home at this time. Instead of relying on second hand information or something that might be floating around on the Internet, spend some time with a real estate professional who can give you the facts, assess your situation and if necessary, point you in the right direction to get help from a trusted mortgage professional. Call us at (503) 851-1645 to schedule an appointment where we’ll help you dig deeper to determine whether you can buy a home now.
Download our Buyers Guide to give you more information.
Also, to mobilize us right away to help you move, visit us here:
FHA Loan Limits Looking to Decrease
HUD is planning another shift in loan limits for FHA loans coming this October. Currently they are set at $295,000 for our Marion & Polk Counties within the Mid Willamette Valley in Oregon. Currently FHA requires a down payment of 3.5% of the sales price leaving a potential sales price to be no more than $280,880.00 come this October. Hopefully this will not have a huge affect on our home sales in this area. Many of the FHA buyers in this market are purchasing homes below $200,000. However, you will see that many move up buyers want to take advantage of the FHA backed mortgages with the minimal 3.5% down payment leaving some sellers with homes priced around the $280,000 price range and above in an ever more difficult position to find a qualified buyer.
Like most markets around the country, ours is also flooded with homes priced above $280,000 and it is a difficult task to find a buyer able to put down 20% during these economic times. Sellers need to look ahead so they are able to position themselves correctly for the coming changes.
Tax Credit Hangover
Is there seriously more talk of another tax credit? Please… the last ones only prolonged the inevitable and ultimately dug our hole deeper. The previous tax credits cost the American Tax Payers, which are mostly middle income earners, $23.5 Billion! Out of the 1.8 Million home buyers that took advantage of the first program, 950,000 bought back in 2009 when the $6500 tax credit was in play. If you bought during that time, and was considered a “first time home buyer”, then remember that you have to pay that money back. The IRS designated that $500 per year to be paid back over a 13 year term. It was basically a free loan.
Now that the tax credits are over, we have a $23.5 Billion bill and the headache gets worse. Existing home sales are down considerably and we are heading into our typical slow period of long Winter months. Job growth is nothing where it should be and consumers are not confident with the track that we are on. As states continue to threaten to cut the budget; that specifically hurts markets like ours where many of our residents are state workers. So, take your ibuprofen and drink lots of water because the headache continues.
Today the Bureau of Labor Statistics jobs report came out that announced that we gained 162,000 jobs in the month of March(www.bls.gov). On Wednesday the ADP (Automatic Data Processing) said we lost 23,000 private jobs. So what does all of this mean? First of all, it is good news that the BLS report shows job gain. I want to make it clear that any growth is good for us right now. The bad news in my opinion is that most all of these jobs are government jobs and many of them are temporary. It is estimated that the US Census Bureau will create approximately 800,000 jobs from January to May of this year. That is all wonderful, but May is only a month away. By the way, did you send in your Census yet?
I do believe that the health of our country’s economy, including our housing market, is going to be built on the foundation of a strong PRIVATE work force. Small businesses and corporations are what encourage the American Dream that we have become known for. Government jobs only create more dependence and add to our problems. As you can tell, I am not a fan of big government.
Our housing market has stopped its hemorrhaging, but we continue to seep if you will. The tax credit that expires in 28 days, which will NOT be extended, is holding us steady with properties under $200,000 here in the Willamette Valley. Homes over that price range and especially homes above $300,000 continue to drop in values. Again, everything hinges on our employment rate and the confidence that Americans have in our economy. We will not see home values stop dropping until we get people back to work. Our current unemployment rate is holding at 10.5% here in Oregon. That is better than the 11.6% it was in 2009, but we have a long way to go. I don’t believe we will sustain our problems in the long run with more government jobs.
In the midst of the economic conditions, I do believe now is the best time to buy a home if you are in the market. I do believe that housing rates will continue to rise from here on out, which will cost a buyer more money than the potential drop in home values. If rates go too high, then it will price home buyers out of the market completely, then we will be living in the early 1980’s once again. Only cash buyers were purchasing homes and only a few were selling on contract. Purchase agreements must be inked by April 30th, and homes must close by June 30th to get the $8000 “First Time Home Buyer” tax credit, and the $6500 “Move Up Home Buyer” tax credit.