Top Ways to Get Your Down Payment

The most common issue for a first time buyer usually seems to be…"How do I get the money needed for down payment on a home purchase":

1. Get A Gift – With FHA, the buyer can get a give from a relative for the down payment and closing costs. 
2. Down Payment Bridal Wedding Registry – Gives a couple an opportunity to received wedding “gifts” through a dedicated bank account to collect down payment funds for a new home
3. 401K Loan – You can borrow the money from yourself, in most cases this loan will not count against your qualifying debt to income rations and as a first time home buyer the most 401K programs will allow for this transaction,
4. Life Insurance – If you have whole life policy you can either borrow against it or cash it in.  
5. Secured Loan -  If you have an asset that is free and clear such as a vehicle you may be able to get a secured loan against the value of the asset.
6. DPA – Several government entities offer down payment assistance programs for first tie home buyers
7. Sale of Personal Property - With verification of value and bill of sale, the funds form the sale of personal property can be used for the down payment.
8. Human Resources – Some employers offer down payment assistance as a benefit to the employees.  These awards are eligible for down payment through FHA financing.
9. Tax Refund – A buyer can use this years tax refund to become a homeowner.  A copy of this years tax return and a copy of the refund check or bank statement showing the amount of the refund on the deposit is all that is required.
10. Second Job – Even though we may not be able to use this income to qualify the borrow if the borrower has not had the job for 2 years, the cash earned from the second nob can be used for the down payment.
11. Savings/Budgeting – Cutting back on extras along with anyone of the abve mentioned ideas will get you into a home faster.

There are some many reason why now is the best time to purchase your first home.  Please contact me to find out more.

What Does Short Sale Mean?

Buying Short Sales: What You Need to Know

As the real estate market remains volatile, one of the best options for many new homebuyers is purchasing a short sale home. But, what does "short sale" mean? A short sale is when lenders have the opportunity to sell a property before the bank forecloses on the home rather than after. While buying short sales creates the opportunity for real estate investors to pay well-below-average housing prices for properties within ideal locations, there are still drawbacks.

If you're interested in buying short sales, here are a few things you need to be aware of:

Why Banks Short Sale Pre-Foreclosure Homes

The last thing a bank wants to do is own a property secured by the bank's loans. When a property owner is in default and owes more than what the home is currently worth, the bank will work with the seller to offer the property for less than they owe on the mortgage loan.

How much money will banks take off? When buying short sales, how much should I expect prices to fluctuate? On average, banks estimate that holding on to the property after foreclosure will cost up to 18 percent of the home value to complete the inspection, appraisals, repair and maintenance. Instead, it is a much easier and financially sound decision for banks to sell the home "as is" to avoid any third-party inspection process.

What to Consider Before Buying a Short Sale

Buying short sales might seem like a good deal for the buyer, but that's not always the case. Here are three major conflicts buyers and sellers face when a short sale, pre-foreclosed home is on the market:

Time: Don't let the name fool you. Buying short sales takes a very long time. There's a whole gambit of scenarios of why a short sale might be delayed, but many of the hurdles buyers have to overcome have to deal with secondary financing on the homeowner's original mortgage, bank processing delays and private mortgage insurance policy breakdowns. Buying short sales is a very complex process, which can leave the short sell buyer in housing limbo for up to six months.

Condition: Short sale homes often need additional maintenance and repairs. When the current property owner is unable to pay the mortgage on the home, more often than not the condition of the property diminishes over time. Additionally, short sale homebuyers should take into account that the property will have had more than one previous owner, which adds to the wear and tear.

Lender Restrictions: Banks can renegotiate a short sale at the last second. If a new law passes, the market begins to change or the bank finds out more information about the property, they reserve the right to change the terms of the contract at any point in the process. Banks will also refuse to pay for extra services like seller closing costs or inspections. If you want something specific inspected on the property, you're probably going to pay for it yourself.

Short sale homes are the real estate market's diamond in the rough. It's true that buying short sales can be a very tricky process, but for the flexible and patient homebuyer, the short sale home can be the dream house they've been searching for.

Can You Still Buy with No Down Payment on a Home?

For many 1st time home buyers requiring down payment assistance, the idea of putting the traditional 10 or 20 percent down on a home purchase can leave them feeling drained or hopeless. Will they have to sacrifice their dream neighborhood or home size simply to afford a pricey down payment?

Fortunately, it may be possible for certain buyers to put no down payment on a home and still qualify for a competitive loan. Whether you are short on cash or just don't want to spend your cash on housing, 100 percent financing can be an attractive option for first time buyers.

Prior to 2007, putting no down payment on a home was a common option for 1st time homebuyers. However, with mortgage lending practices coming under fire in recent years, the option to finance 100 percent has lost popularity. Yet there are still programs available to 1st time home buyers requiring down payment assistance who meet certain eligibility requirements.

100% Financing Options - No Down Payment

USDA Loans - A USDA Guaranteed Loan is a Government insured 100 percent purchase loan. These USDA Guaranteed Loans are only offered in rural areas and serviced by direct lenders that meet federal guidelines. While they may be an attractive option for first time home buyers, there are income restrictions and loan limits that first time home buyers must meet.
VA Loans - The Department of Veterans Affairs (VA) backs loans provided by certain lenders to help qualified veterans, reservists and active-duty service members to finance their homes. For those first time home buyers that qualify, there are flexible income, debt and credit requirements.
ADDI Program - The American Dream Down Payment Initiative (ADDI) provides down payment, closing costs and rehabilitation assistance to eligible individuals. The amount of ADDI assistance provided may not exceed $10,000 or six percent of the purchase price of the home, whichever is greater. To be eligible for ADDI assistance, individuals must be 1st time home buyers interested in purchasing single family housing. Additionally, individuals who qualify for ADDI down payment assistance must have incomes not exceeding 80 percent of area median income.

90%+ Financing Options

FHA Loans  FHA Loans offer a 30-year fixed-rate loan for first time home buyers with a 3.5 percent down payment. The down payment can be a gift from a family member or other grant program, and there is a maximum mortgage amount for each county.
Fannie Mae HomePath Loans: Fannie Mae HomePath offers a five percent down payment program on many of their foreclosed properties. To be eligible, you must have a minimum 660 credit score.

1st Time Home Buyers Down Payment Assistance Programs

If you're a first time home buyer and don't qualify for any of the above scenarios, you may be wondering where you can find down payment help. Fortunately, there are multiple ways to receive 1st time home buyers down payment assistance.

Junior Loans: Many banks offer Junior Loans to first time home buyers, which are typically smaller loans (under $50,000) that help buyers meet tough down payment requirements.
Gifts and Gift Registries: An increasingly popular option for buyers is to register for down payment gift registries, which allow family and friends to donate funds in lieu of buying a traditional wedding, birthday or graduation gift.  Check out myregistry.com or downpaymentdreams.com.
Tax Refunds: Buyers who typically receive a refund on their income taxes can easily put the extra cash toward a down payment.
Seller Negotiation: A less popular, yet worthwhile option may be to negotiate a donation of down payment funds from the home seller. Because of the extreme home surplus in recent years, many sellers are willing to negotiate untraditional payment terms or purchase agreements. It may be possible that the seller will consider giving you a portion of the home down payment in lieu of reducing the home price.

Regardless of your financial situation, buying a home is a big decision and all financing options should be considered carefully. With the right resources at hand, you'll be prepared to make an offer on your dream home in no time.

Down Payment Help for First Time Home Buyers

"Water, water everywhere, nor any drop to drink." Rime of the Ancient Mariner 

If you're a first time home buyer, you might be able to sympathize with this statement. Thanks to the recent economic recession, there is no shortage of affordable homes, yet due to the mortgage crisis, lending has become tight. Prior to 2007, putting no down payment on a home was a common option for first time home buyers  However, with mortgage lending practices coming under fire in recent years, the option to finance 100 percent has lost popularity. In today's market, a typical down payment can range anywhere from 10 to 20 percent; however, in this economy, few people have that much cash available to them. Fortunately, there are ways to receive down payment help for first time home buyers, either through a third party lender or private funding.

Where Can You Find Down Payment Help for First Time Home Buyers? 

Junior Loans: One option for first time home buyers who need down payment help is to apply for a Junior Loan. Many banks offer Junior Loans to help first time buyers who would otherwise be unable to meet the down payment requirements for purchasing a home. These loans are typically offered at the state level, are under $50,000, and have fixed interest rates.

Gifts and Gift Registries: Instead of using a traditional bridal registry, many couples who are also first time home buyers are opting to register for a home down payment gift registry. This allows family and friends to donate funds toward a down payment, helping newly married couples reach the goal of owning a first home. To find out more about a home down payment gift bridal registry as well as a graduation or birthday gift registry, check out myregistry.com or downpaymentdreams.com.

Other Down Payment Assistance Options

Tax Refunds: Buyers who are receiving a refund on their income taxes can choose to put the extra cash toward a down payment. It's a great way to make use of money you were not expecting to receive, and depending on how much you choose to withhold each year, can easily contribute to a large portion of your down payment.

Seller Negotiation: Another option may be to negotiate with the home seller for a donation of down payment funds. In a slow real estate market, many sellers may be willing to negotiate nontraditional payment terms or purchase agreements. Some home sellers might even consider offering you a portion of the down payment rather than lower their selling price.

First time Home Buyers Tax Credit - $8,000 of tax credit was available for first time home buyers in 2010. A $6,500 tax credit for repeat home buyers was also available, yet both of these incentives have expired. However, service members who were on official extended duty outside of the United States for at least 90 days between Jan. 1, 2009 and May 1, 2010 may qualify for a one-year extension, which could be a great opportunity to leverage funds for your down payment. 

Still Strapped for Cash? 

Consider 100% financing with mortgage lending practices coming under fire in recent years, the option to finance 100 percent has lost popularity. Yet there are still programs available to first time home buyers requiring down payment assistance who meet certain eligibility requirements.  Before you throw in the towel on your home search, see if you may qualify to purchase with no down payment.

Buying a home is without a doubt one of the biggest decisions a person can make in a lifetime. It's a large responsibility and all down payment and home financing options should be considered carefully. Before taking a loan or getting knee-deep in a large mortgage, be sure to do a thorough assessment of your financial situation and ensure that you can afford the home you have in mind. With the right financing and adequate information, you'll be able to move confidently into home ownership.

Did You Know? FHA Allows Bridal Registry Accounts

FHA allows for couples getting married to set up a Bridal Registry Account. The intent is to give couples planning to get married the opportunity to amass monetary gifts from friends and family for the specific purpose of making the down payment on a home.

Just like registering at a specialty or department store, the FHA Bridal Registry program allows you to register with a lender. Then your friends and family are able to make gift payments into an interest bearing account on your behalf. These gifts can be given with the assurance that the donors are providing the couples or individuals with an opportunity to purchase their first home.

Contact your local lender for more details. Click the following link to find out more about homes in your neighborhood

Possible New Downpayment Requirements for FHA

According to newswire, the House Financial Services Committee have drafted a bill to raise the minimum down payment for Federal Housing Administration-backed loans to 5 percent as well as cut FHA loan limits in many markets.

The current minimum requirement for most home buyers is 3.5%

To read the entire article click here. To find out about homes in your area, click here.

What is a Mortgage Credit Certificate?

A Mortgage Credit Certificate allows the homebuyer to claim a tax credit for some portion of the mortgage interest paid per year. It is a dollar for dollar reduction against their federal tax liability. Mortgage Interest Credit (MCC) is a non-refundable tax credit, therefore, the Homebuyer MUST have tax liability in order to take advantage of the tax credit.

Who is eligible to receive an MCC? The program is open to those individuals and families who:
• meet income and home purchase requirements;
• have not owned a home as primary residence in the past three (3) years;
• meet the qualifying requirements of the mortgage loan;
• will use the home as their principal/primary residence.

To find out more information click here. To search for homes in your area click here

Reoccuring Question from First Time Home Buyers

Many first time home buyers contact me and seem to ask the same question, "should I buy or keep renting", and this, in part, what I tell them.

Finances is just one part of the equation. But the first question you should ask yourself is why did you begin to consider purchasing a home? According to a Fannie Mae National Housing Survey, the 4 biggest reasons people purchase a home has nothing to do with money, which are (1) place to raise/educate their children, (2) a place to feel safe, (3) plenty of living space, (4) control over the space. In my opinion the cost of a home will probably remain relatively unchanged even if prices continue to depreciate. Money is a factor in the home purchase, but not the only one.

If you would like to view homes in your area, click here.

Five Mistakes Home Buyers Make

In reading an article from the Wall Street Journal, I am happy to see a major publication to focus on the home buyer, something most news articles do not address as of late. In summation it reminds home buyers the benefits of working with a real estate agent.

For some areas, it’s easy to figure out comparables in the area to base your asking price, but there is much more to a transaction that putting an offer. Buyers must navigate the lending process, repairs, inspections, closings and more.

Guessing what you can afford can create a real headache. Getting a lenders pre-approval letter before submitting a offer to a seller is critical. It shows you are a qualified buyer ready to purchase.

Buying a home is an emotional process for most home buyers; a realtor assists the buyers in keeping a level head in the buying process.

To read the WSJ article “5 Mistakes Home Buyers Make”

Tax Credit Deadline Extended; Flood Insurance Program Reinstated

Congress has passed a bill extending the Homebuyer Tax Credit closing deadline to September 30, 2010. This is a huge win for REALTORS® and homebuyers, and the National Association of Realtors [NAR] worked closely with members of Congress to make it happen.

The extension applies only to transactions that had ratified contracts in place as of April 30, 2010, and have not yet closed. There will be no gap between June 30 and the date the President signs the bill into law.

Additionally, Congress has extended the National Flood Insurance Program (NFIP) through September 30th. The bill is retroactive and will cover the lapse period from June 1, 2010, to the date the law is enacted. NAR will continue to work with Congress on the NFIP Reform bill, and we will keep you posted on those efforts.

For additional information on both the tax credit deadline and the NFIP, visit Realtor.org/Government_Affairs.

FHA: Facing Reality

The Federal Housing Administration has been focusing its efforts to shore up its finances on stricter rules for lenders, but in testimony before the House Financial Services Committee on Wednesday, Housing and Urban Development Secretary Shaun Donovan is expected to announce changes to rules for borrowers, requiring more skin in the game.

Changes expected to be announced at the hearings include:

•Borrowers will need to put more money up front. Right now borrowers can put down as little as 3.5 percent. One bill in Congress calls for that to be raised to 5%. Private lenders today require between 10% and 20%. Most want 20% unless your credit score is above 750.
•Borrowers may have to pay more in insurance premiums. Right now that premium is 1.75% of the loan value plus 0.5% or 0.55% per year.
•Sellers will be restricted by how much they can help the borrower. Right now a seller can pay as much as 6% of the home's value in closing costs. The maximum level is expected to be lowered to 3%.
•Borrowers may need better credit scores. Right now the score can be as low as 500. While that's the law, lenders don't usually accept scores that low. The FHA is expected to raise that minimum score. This may not be as noticeable as the other changes because most lenders do expect a higher score, but this change will prevent abusive lenders from lending to unqualified borrowers.

The take away: Change is coming and its time to make the purchase of your new home.

To read the entire article: FHA Finally Facing Reality

Pending Homes Sales Rise

Pending home sales rose again, marking eight consecutive monthly gains – the longest streak since measurement began in 2001, according to the National Association of Realtors®.

The Pending Home Sales Index,* a forward-looking indicator based on contracts signed in September, rose 6.1 percent to 110.1 from a reading of 103.8 in August, and is 21.2 percent higher than September 2008 when it stood at 90.9. The gain from a year ago is the largest annual increase on record, and the index is at the highest level since December 2006 when it was 112.8.

Lawrence Yun, NAR chief economist, said the momentum is understandable. “What we’re witnessing is a rush of first-time buyers trying to beat the expiration of the tax credit at the end of this month,” he said. “Home values will stabilize sooner rather than over-correcting. That, in turn, will mean wealth stabilization for the vast number of middle-class families and lay the foundation for a durable economic recovery.”

NAR estimates approximately 3 million renters are now financially well-qualified to buy a median-priced home. “As long as buyers do not overstretch and stay well within their budget, a sizable pent-up demand can be tapped among financially qualified potential buyers,” Yun said. “Although the tax credit is greatly reviving the existing home market, new-home sales may continue to struggle as home builders hold back production to drive down inventory. In addition, there remains an ongoing credit crunch for construction loans.”

Homebuyer Tax Credit

Both the House and the Senate have passed an unemployment insurance bill, which includes an amended that expands and extends the tax credit. The bill will be sent to President Obama for his signature in the next day or so.

Here is a comparison chart on the difference, most notable change its just not for first time home buyers.

Click Here

Pending Homes Sales on Record Roll

Contract activity for pending home sales has risen for six straight months, a pattern not seen in the history of the index since it began in 2001, according to the National Association of Realtors®.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in July, increased 3.2 percent to 97.6 from a reading of 94.6 in June, and is 12.0 percent higher than July 2008 when it was 87.1. The index is at the highest level since June 2007 when it was 100.7.

Lawrence Yun, NAR chief economist, stated “other buyers are taking advantage of low home values before prices turn higher. Nationally, the typical mortgage payment now takes less than 25 percent of a middle-income family’s monthly income to buy a median priced home, with payment percentages so far in 2009 being the lowest on record dating back to 1970. As long as home buyers stay within their budget, mortgage payments will be very manageable,”

NAR estimates that about 1.8 to 2.0 million first-time buyers will take advantage of the $8,000 tax credit this year, with approximately 350,000 additional sales that would not have taken place without the credit. Buyers have little time to act because they must complete the transaction by November 30 to qualify for the credit. Unless extended, contracts signed but not completed by that date will not be eligible – it is taking approximately two months to complete home sales in the current market.

HOMEBUYER TAX CREDIT CAN IMMEDIATELY HELP THOUSANDS OF FIRST-TIME HOMEBUYERS TO BUY A HOME

Speaking to the National Association of Home Builders Spring Board of Directors Meeting, U.S. Housing and Urban Development Secretary Shaun Donovan today announced that the Federal Housing Administration (FHA) will allow homebuyers to apply the Obama Administration's new $8,000 first-time homebuyer tax credit toward the purchase costs of a FHA-insured home. Donovan said that today's action will help stabilize the nation's housing market by stimulating home sales across the country.

The American Recovery and Reinvestment Act of 2009 offers homebuyers a tax credit of up to $8,000 for purchasing their first home. Families can only access this credit after filing their tax returns with the IRS. Today's announcement details FHA's rules allowing state Housing Finance Agencies and certain non-profits to "monetize" up to the full amount of the tax credit (depending on the amount of the mortgage) so that borrowers can immediately apply the funds toward their down payments. Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs, which can help achieve a lower interest rate.

To read the entire news release click here.

Austin Down-Payment Assistance Program

The Down Payment Assistance Program (DPA) provides qualified, first-time homebuyers, with a zero interest loan to assist with purchasing a home located within the Austin City Limits. DPA funds cover the down payment and eligible closing costs and pre-paid expenses associated with buying a home.

The DPA Program options are as follows:

Standard DPA: Up to $10,000 in a deferred, forgivable, 0% interest loan for 10 years. Up to $1,000 additional for borrowers in a Mortgage Credit Certificate Program and up to $4,999 for people with disabilities. The loan is forgiven if the borrower remains in the home ten (10) years without transferring title. Otherwise the loan is due and payable if the borrower sells, leases, transfers title, refinances, gets a home equity loan, or pays off the first lien within ten (10) years.

(NEW) Shared Equity DPA: Up to $40,000 in a deferred,0%-interest loan for 30 years. Borrowers must pay back the DPA loan plus a percentage of their equity (that is the same percentage as AHFC's contribution) when the borrower sells, leases, refinances, gets a home equity loan, pays off the first lien, or otherwise transfers title within 30 years. When selling the home, the borrower agrees to give AHFC the chance to purchase the house at market rate ("right of first refusal").

For more information you can visit: http://www.ci.austin.tx.us/ahfc/first_dpa.htm