Owning Your First Home

The Home Buying Process

Have Your Credit Pre-Approved

Getting a credit pre-approval means you receive a loan commitment from your mortgage company before you have found a home, based on a review of your credit and finances. A credit pre-approval shows sellers that you’re a qualified buyer and helps you establish a clear price range.

The credit pre-approval process

The process of applying for a credit pre-approval is the same as a typical mortgage application, except that it doesn’t include information on the property you will purchase. Your loan officer collects information on your credit, income, assets, and debts, and sends this information through an underwriting system. If the underwriting process determines that you qualify for a loan, you receive a loan commitment for up to a certain amount, which is contingent on the property meeting certain criteria.

Benefits of having your credit pre-approved

There are many good reasons for getting a credit pre-approval before you buy a home:

• It makes your home search more efficient by allowing you to focus only on homes you know you can afford.
• It lets sellers know that you can back up your offer, so they don’t have to worry about whether you can get a loan.
• It lets you know early in the process if you will have difficulty getting pre-approved, so you have a chance to address problems before finding a home.
• It gets most of the mortgage process out of the way up front, so you can complete your transaction quickly after you find a home.

Go House Hunting

Now that you’ve had your credit pre-approved and know how much you can afford, it’s time to go househunting.

You may look at one house or two dozen before you find the one that’s right for you. Just keep an open mind, and focus on the things that are really important to you, and you’re sure to find a place where you’ll feel at home.

Choosing a neighborhood

House-hunters should keep in mind the familiar adage about the three most important features of a home: location, location, location. That’s because finding the right home for you and your family has as much to do with the neighborhood as with the home itself. In fact, you’ll probably notice during your search that a home in one area costs much more than a similar home in another. Factors like safety, school quality, and proximity to shopping and entertainment all contribute to demand for homes in a given neighborhood.

Beyond price, what you look for in a neighborhood probably has a lot to do with your personal situation.  How far are you willing to commute to work? How close do you want to be to family and friends? Do you have young children who would enjoy a nearby playground? Picturing your day-to-day life in a certain neighborhood is a good way to predict whether you will feel comfortable there.

Considering different house styles

You may want to look beyond the traditional detached single-family home. Condominiums, town houses, and duplexes can be more affordable options, especially if you’re looking in a densely populated area. These types of housing may not offer as much yard space or privacy as single-family homes, but those may not be as important to you as the chance to own a home in the neighborhood of your choice.

Building a new home

If you’ve looked and looked for your dream home without success, or if you want to be the very first owner of a brand new home, consider building. You’ll have more opportunity to customize the home’s features and design, more up-to-date appliances and building materials, and usually a builder’s warranty to cover problems that come up in the first year.

Make an Offer

So, you’ve found a house you want to buy. Congratulations! Now you need to decide how much you’re willing to pay to make it yours. In today’s real estate market multiple offers on the same home are commonplace, so you may only get one chance to make an offer that the seller will consider. That’s why it’s important to think carefully about your strategy.

Your real estate agent should be able to give you a list of similar homes nearby that have sold recently, and for how much. Although you can’t directly compare the home you want with the homes on the list without ever having been in them, you can use the list of comparable sales to get a general idea of the neighborhood’s price range.

In addition to sale prices for other homes, there are several ways you can determine a good amount to offer:

• The condition of the house. Is the home in move-in condition, in need of paint and other cosmetic improvements, or a fixer-upper that needs some real work?
• The market. If you are in a buyer’s market-where there are more homes for sale than there are people to buy them-prices are probably stable or falling. If you are in a seller’s market-where there are more buyers looking for homes than there are homes for sale-prices are probably moving upward.

Your threshold. If you’ve gotten a credit pre-approval, you know how much you can borrow for your home purchase. Of course, you may not be comfortable paying as much as you’ve been approved to borrow, so think carefully about your financial situation before making an offer.

Get a Home Inspection

When you are making what is likely the largest investment of your life, you should know as much as possible about what you are buying. That’s why it’s a good idea to have a home inspected before you make your purchase. Most purchase contracts contain provisions for a home inspection to be performed within a certain timeframe, and sometimes they specify what action the buyer and seller may take if problems are uncovered.

Finding a home inspector

It’s very important that you choose a qualified inspector who has plenty of experience with residential homes. Contact a national or state association of home inspectors to find out what certifications it requires for membership and if there are any members in your area. You may also want to ask your real estate agent for a list of reputable companies.

What the inspection should cover

At a minimum, the inspector should examine the following:

• Exterior structural components, including the foundation, roof, siding, and chimney.
• Interior structural components, including the basement or crawlspace, attic, flooring, and ceilings.
• Major systems, including heating, cooling, plumbing, and electrical.

You should make every effort to be present during the inspection so that you will have an opportunity to ask questions and see first-hand what the inspector looks at. You should receive an inspection report with descriptions, and possibly photographs, of any problems with the home.

Close the Deal

You’ve found your home, agreed on a price with the seller, had the home inspected, and now you’re ready for the closing, where you will officially take ownership of the property. Welcome to the end of the home buying process-and the beginning of your homeownership journey.

When to schedule your closing

The closing date will depend on when the seller is ready to move out, when you are ready to move in, and when all of the mortgage details have been finalized. You may want to request a closing date near the end of the month in order to minimize the amount of interest you have to prepay on your mortgage.

Who should be there

Closing practices vary based on location, but attendees may include the following:

• Buyer and seller
• Real estate agents for the buyer and seller
• Closing agent
• Title company representative
• Mortgage company representative
• Attorney

What happens at closing

Despite all the new technologies that are streamlining the mortgage process, the closing phase remains very paper-intensive. You will have to review and sign a hefty stack of documents, some of them in duplicate and triplicate. You will also have to pay for any closing costs, including:

• Lender fees, such as an appraisal fee, credit report fee, origination points, and discount points
• Third-party fees for services not provided by your lender, which may include a settlement fee, title insurance, and attorney’s fees
• Prepaid items that must be paid to your lender in advance, such as prepaid interest, hazard insurance, and deposits to set up an escrow account

Move into Your New Home

So you’re ready to start life in your new home – congratulations! Now all you have to do is get yourself, your family, and your belongings there intact. You can save time and energy by hiring a moving company, or save money by doing it yourself – it all depends on how much stuff you have, how far you’re moving, and how much you can afford to spend.

Hiring a moving company

The key to choosing the right mover is trust. To find a company you can have confidence in, look for one that:

• Has been in the business for a number of years
• Has a clean record with the Better Business Bureau®
• Can provide several references to satisfied customers
• Meets the standards of your state’s professional association for moving companies, if there is one

Moving yourself

Your move may not require professional help, but pulling it off successfully does require a professional approach. You wouldn’t want your moving company taking shortcuts, so why should you?

Preparations should start well before moving day. Keep these tips in mind:

• Get the right moving supplies, and plenty of them. High-quality boxes, padding, and other packing materials are a good investment.
• Take a room-by-room inventory of everything you will take with you, and get rid of the rest either in a garage sale or by donating it to charity.
• Label each box you pack, and keep a list of its contents to make unpacking easier.
• Set aside a box of items you’ll need immediately after you arrive, such as cleaning supplies, kitchen utensils, dinnerware, bath items, tools, and a telephone.
• Have kids pack a box of their favorite things to unload right away at the new house.

Settling in

Making yourself at home in your new surroundings is about more than unpacking. Try to explore the neighborhood and get acquainted with neighbors right away. Ask about stores, playgrounds, and places of worship, so you don’t have to put your life on hold while you familiarize yourself with the area.

Federal Tax Credit for First Time Buyers!

First Time Buyers have a new incentive to help towards owning a home. We currently have very attractive conditions that should help new buyers enter the market and achieve their goal of owning their first home. There are local Down Payment Assistance Programs and new Loan Programs designed to help you own your first home.

The market current provides and supports opportunity for you:

• Historically Low Interest Rates
• Real Estate is a Reliable Investment ($10,000 dollar investment in Stock Market in a normal market typically nets 12% ROI over 10 years, $10,000 dollar investment in the Stock Market in a bull market nets a 25% ROI over 10 years, and a $10,000 investment in a home in a normal market nets a 100% ROI over a 10 year period. Real estate is a more reliable investment than stocks. Source: NAR
• It’s a Buyer’s Market–Plenty of Supply and Little Demand
• The Buy Smart Time–typically a good time to buy a home is when the market is recovering.
• Rates are back where they were at historically lows to make mortgage payments affordable.
• There is a wide selection of houses which is good news for buyers when they have good home to choose from.
• Homeowners in it for the long term nearly always come out ahead when building wealth.
• It is a good time to take advantage of the strong local economy.
• Home sales have slowed giving buyers the advantage.

Additionally, the Government is offering a $7,500 tax credit for First Time Home Buyers!

Who is eligible? The $7,500 tax credit is available for first time home buyers only. The law defines a first time home buyer as a buyer who has not owned a home during the past three years. All U.S. citizens who file taxes are eligible to participate in the program.

What Type of Homes Qualify? All homes within the U.S., whether single-family, town homes or condos will qualify. There are conditions. The home must be used as a primary residence, and the buyer has not owned a home in the prior three years. The tax credit includes newly constructed home.

If you are thinking of buying your first home, now may be a very good time to learn about your options. Visit our website for dates for First Time Home Buying Seminars or call me to register for the seminars or for details on how you can begin getting started in this process. The time is good and there is a deadline (July 1, 2009 for this tax incentive)….so call today and let’s get started.

$7,500 First-Time Homebuyers Tax Credit

Overview

The Housing and Economic Recovery Act of 2008 (H.R. 3221) signed into law by President Bush in July offers first-time homebuyers a tax credit equal to 10% of the cost of their home up to $7,500. This tax credit is available to first-time homebuyers who purchase a home in the United States as their principal residence on or after April 9, 2008, and before July 1, 2009.

To qualify as a first-time homebuyer, you cannot have owned an interest in a principal residence in the past three years from the date of the qualifying purchase.

To qualify for the full amount of the tax credit, you must earn no more than $75,000 if filing as Single or Head of Household. If filing a joint return, the buyers may have a combined income of no more than $150,000. There is a phase out of the credit if reported income is more than $75,000.

The tax credit allows you to deduct the credit from your total tax liability for the year in which the credit is taken. Also, the tax credit is �refundable,� meaning that the taxpayer can receive a tax refund if the credit is greater than the estimated liability.

This tax credit must be repaid. However, the repayment period is 15 years unless the home is resold before the end of that period, and there is no interest on the amount of the credit that is received. Repayment of the credit begins two years after the credit is claimed and is repaid in increments of 6.67% per year of the credit amount.

Essentially, the tax credit is a 15-year interest free loan from the government. Money today is worth more than an equal amount of money in the future, making the tax credit a fantastic opportunity that any first-time homebuyer cannot afford to miss.

View the complete text of H.R. 3221 in PDF format, or visit the Library of Congress and search for Bill Number H.R. 3221.

Further information can be found at www.federalhousingtaxcredit.com or www.irs.gov. This information is provided for general awareness only, and is not intended for the purpose of providing legal, accounting, tax advice or consulting of any kind. Please consult with your tax professional for complete details.

Here are a number of calculators that will help you access how ready you are to purchase. They will also help you better understand the purchase process and whether you can afford to purchase.

How Much Home Can I Afford?

This calculator will help you get a quick estimate of what type of house payment and loan amount you can afford based on your current total monthly income and debt payments. Fill in the following information and click the Calculate button for results.

Calculators Rent vs. Own

This Rent vs Own calculator allows you to compare the advantages and disadvantages of owning vs. renting a home. Fill in the following information and click the Calculate button for results.

How much will my payments be?

This simple mortgage payment calculator allows you to estimate mortgage payments for any fixed rate loan. Complete the following fields and click the Calculate button to find out your mortgage payment.

Amortization Calculator

This simple calculator allows you to calculate a fixed-rate amortization schedule. Fill in the following information and click the Calculate button for results.

Save by Making an Extra Payment

This mortgage prepayment calculator shows you how much sooner you pay off your loan by making extra payments. Fill in the following information and click the Calculate button for your mortgage prepayment savings.

Refinancing Calculator

This mortgage refinance calculator will help you determine what your monthly savings might be if you refinance your mortgage now. Fill in the following information and click the Calculate button to find your mortgage refinance savings.

Savings Calculator

This savings calculator can help you set your savings goals by calculating not only how much you need to save each month to reach your goals, but also how long it will take you to reach them at your current level of savings. Fill in the following information and click the Calculate button for results

How Long to Pay Off My Credit Cards?

This credit card payoff calculator will tell you how long it will take you to pay off your credit card bills with the amount you pay now, and how much more you would have to pay each month to eliminate your credit card debt even sooner. Fill in the following information and click the Calculate button for results.

What It Takes to Become a Millionaire?

This millionaire calculator shows you how long it will take you to become a millionaire. Fill in the following information and click the Calculate button for results.

I am Jeanean Gendron, your Redding and Shasta County Specialist. I can be reached at 530 276-7417. I answer my phone. Visit our websites to learn more about Redding and Shasta County Real Estate. I love helping first time home buyers.