Most first time homebuyers don’t really know what it is like to be in a sellers’ market. In recent years buyers were in the driver’s seat and usually got there way during negotiations. That is starting to chance with a decrease in inventory in the lower to median price point of each town. The first thing we noticed which actually started 6-8 months ago was seller’s unwillingness to make any adjustments or repairs after a home inspection. This was mainly due to the sellers feeling there were selling the home for fare less than they wanted. Just recently particularly in the last 60-90 day we are seeing homes selling close to full asking price and in some instances above asking price. The fact of the matter is that inventory is low due to many homeowners not able to sell their home because they don’t have any equity and we are in the peak of the housing market season.
The fact of the matter is that if you are in the market to buy a home it’s important to tour the home you want to see right away! You don’t want to compete with other buyers and get beat out by another offer. Make sure your realtor is available for you with at a minutes notice so that they are giving you the best chance of getting the home you want. By doing that you will greatly increase your chances of getting you home accepted.
1. "I have no money for down payment or closing costs"
Response: There are many different types of programs some of which are geared for people who don’t have a significant amount to put down. One program in particular is the SONYMA program available to New York residence. They provide 97% financing with a 3% down payment assistance loan that is completely forgivable so long you live in the home for a certain amount of time. (100% financing). Another great program is the FHA mortgage that only requires 3.5% down which can come from a gift, retirement account withdrawal, and many other sources. They will also allow a 6% sellers concession where the seller will credit you 6% of the purchase price back to you so that you can pay your closing costs. There are many great loan programs for all different types of borrowers.
2. "My Credit is no good"
Response: you need some form of credit to obtain a mortgage however there are some programs that will tolerate some “scratch and dent” credit. Many buyers don’t realize that they can actually pay down some debt and the mortgage company can do something called a rapid re-score that will increase your credit scores overnight. That could be the difference of qualifying and not. In addition banks will tolerate judgments on your credit so long that they are paid. Don’t make assumptions and meet with a professional to evaluate your credit with you. Most of the time a few easy adjustments and payments could raise your credit score 20-60 points overnight!!!
3. "Even if I qualify on paper I can’t afford those mortgage payments."
Response: Most people heard about the tax benefits of homeownership but don’t fully understand how they work. Assuming you will not be taking out a loan for 1.1 million than you can take advantage of the tax benefits. The real estate taxes and interest portion of your mortgage payment are tax deductible. So assuming real estate taxes are $8,500 and the interest paid for the year is $14,507 (300,000 at 4.5% interest) your total deduction would be $23,007. If you multiply your total deduction ($23,007) to your current tax rate than you will find out how much extra cash you will receive from being a homeowner. So assuming you tax rate is 31% than 23,007 x .31 = $7,132.17 or $594 per month!!!
It’s important that you seek the information from a professional who will guide you and educate you fully about buying a home. The anxiety of not knowing is much worse than finding out you have to do a few things before you can buy a home. It’s important to have a plan so that you’re ready when the time feels right!!!
1) Prices of homes are going up. The secret no one is telling you yet is by next spring rates could be in the high 5%’s or Low 6%’s. The Federal Reserve has been artificially holding down mortgage rates down in the 3%’s for as long as they could. They have indicated they will not continue to hold rates down the way they have been. Just the indication in June that the Federal Reserve might “taper” their bond buying caused rates to go up over 1%. Add this to higher priced homes and your buying power is decreasing
2) It’s all about your credit score. Your credit score has more to do with what rate you get than any other factor.
3) Opening a new account causes huge reductions in Fico Scores. A new car loan could cause a 15-20 point reduction in your credit score, leading to a higher rate. This also means not opening new credit cards. That 10% discount you get at Target or Kohl’s, could cause you to get a .25% higher rate for the next 30 years.
4) Mortgages are easier to get today than they were yesterday. Banks are finally allowing lower down payments and credit scores to qualify for a mortgage. This however doesn’t mean that the paperwork and documentation is getting easier.
5) You may not qualify for what you want today, but a good Loan officer might be able to help you restructure your credit or debt so you can qualify next month. It’s important to get your Loan Officer involved early.
6) You get what you pay for. If you go to 1-800-internet-bank you will be doing business over the phone and internet. You wouldn’t buy your house off eBay, you shouldn’t get a mortgage this way either. Internet banks won’t understand your market area, they have trouble tracking your documents and you will be signing all your disclosures by yourself, with no idea what they mean. An in person application is the cornerstone for your whole home purchase. Without one, you can’t be sure what you are signing, or applying for. Plus getting the wrong type of mortgage program because the loan officer never truly evaluated your whole picture, could cost your 10’s of thousands of dollars over the first 10 years.