| A Long-Term Plan for First-Time Homebuyers Let’s Get Started! This market appears to be the perfect opportunity for First-Time Homebuyers to grab a great deal and get into a home that meets all your needs on YOUR terms. It’s about time, too! In the past 5 years, sellers were calling the shots. Not only were contracts written at full list price rejected by sellers, but many had to forfeit their rights to an appraisal, a home and radon inspection, and put down an insane amount of money to even be considered. Even so, you were sweating for as long as a week if the seller wanted to “feel out” his options and see if any better offers came in. There wasn’t much a First-Time Homebuyer could do – especially one who didn’t have any money to put down! But the tide has turned and now the Buyers are in the driver’s seat. A large inventory, lack of consumer confidence, high gas prices, and constant press has compounded the problem by freezing First-Time Homebuyers from jumping into the market. The reality is interest rates are still at all-time lows, sellers are motivated to sell and offering a number of incentives including closing cost concessions, price reductions, and sometimes seller financing. With the job market in the Metropolitan area of DC still incredibly strong property values are likely to continue to rise. It is forecasted that the property values in the Northern Virginia area will increase modestly for 2009 and then increase more significantly by 2010. Any purchaser of real estate knows how important it is to get into a declining market just before it is going to turn….and NOW is the perfect time! Your Credit Score A homebuyer with good credit, a steady employment and rental history, and adequate savings is an excellent candidate for a home purchase. What is good credit by today’s standards? Lenders like to see scores about 620 or higher but will work with buyers with scores as low as 580 or lower depending on the circumstances. Typically, the higher the risk is for the lender, the higher the interest rate. If you have not had time to establish credit, getting started right away is a good idea. Take out a department store credit card, get a mobile phone plan in your name, and see if you can get a credit card through your parents’ credit union or bank. Often times, these institutions will let you “piggy back” on your parent’s good standing and issue you an unsecured credit card with a small credit limit. Using these cards and paying them off monthly is an excellent way to establish credit. While having credit cards is essential to establish credit, having too many with high balances is extremely detrimental. There should be a commitment to pay a minimum of 10% of your balance if it is too high for you to pay off completely. This will help you establish discipline with regard to high cost purchases. The Credit Bureaus TransUnion®, Experion®, and Equifax® account for the three national credit agencies that dictate your creditworthiness to any lending institution – whether for a home loan, an auto loan, or a department store credit card. Once you’ve started establishing credit, it is imperative that you routinely check your credit status. With identity theft a growing concern, it is in your best interest to know which accounts you hold and their balances. The Federal Government passed legislation to protect consumers under the FCRA and the Fair and Accurate Credit Transactions (FACT) Act, the Free Annual Credit Report program. This program was specifically designed by the federal government to protect consumers from identity theft and empower them to take a proactive approach to correcting the almost always flawed reporting tendencies of the credit bureaus. Beware of imposter sites that have you provide credit card information and subject you to “Free Trial Periods”. This arrangement allows the company to begin charging you a fee after the initial “Trial Period” expires. Often times, consumers forget and have an unexpected charge on their credit cards. In order to access a truly free credit report (and this does not include your credit score), you must acquaint yourself with the Federal Trade Commission web site. Here you will learn exactly where you must go to get your free reports. Talk to a Lender and Accountant If you are seriously contemplating getting into the housing market instead of throwing your money away on rent, you should consider talking to a lender now, even if your plans are a year away. This is a great way to find out your credit score, know your financial assessment from a lender’s perspective, and be able to adjust to improve your position. There are significant tax advantages to owning a home so scheduling an appointment with your tax accountant is another excellent idea. He can guide you with regard to assessing your savings with regard to your W-4 (Exemption from withholding) and the positive adjustment to your paycheck every payday! It also gives you a clear picture of what your goals are and how to get there. If you are tired of renting and living in someone else’s home or an apartment, get yourself in a position where you will hold all the cards! That Pesky Down Payment According to the National Association of Realtors®, 22% of first-time homebuyers are receiving their down payments from their parents. However, not all of us are in a position to do so. Aside from waiting for the lottery to hit, what is a person to do? A pretty old concept which has been put aside during the 100% financing frenzy is SAVINGS! While everyone knows how hard it is to stretch the dollar paycheck to paycheck, find ways to cut back even $200/month. This might seem exorbitant but consider your lifestyle. Are you eating out more than 2 times a month? Are you stopping each morning to get that $5.00 cup of coffee on your way to work? Are you going over on your text messaging or minutes on your cell phone use? Do you really need that 6th pair of shoes this month? Must you have to drive alone to work or could you carpool? Bottom line is there are plenty of ways in which we can modify our lives in a very small way and dramatically change our spending habits without even thinking about it. Start NOW!!! As a last resort, if your company 401(k) plan allows loans, you may usually borrow from your 401(k) balance, although there are maximum amounts allowed. Repayment is normally due within five years. Some plans offer longer repayment terms if the money is used for a house down payment. You must be careful, though. If you lose your job, the loan will be due in full and if you can't repay it, it will be considered a distribution, subject to taxes and early withdrawal penalties. Borrowing from your 401(k) is like loaning yourself money but it may come with a very high price tag if your situation changes at work. See your accountant or financial planner for guidance Find Your Realtor® Interview different Realtors® to find someone who most closely matches your style and with whom you feel comfortable. As an Accredited Buyer's Representative, ABR®, I am certified and licensed to provide you exceptional services if you are planning to buy in the Northern Virginia Real Estate market. Because I NEVER practice Dual Agency - the term used when Realtors® represent both buyers and sellers in the same transaction - you may rest assured in the knowledge that my motives are only to find you the best home for you on your terms. Also, as your Buyer’s Agent, my fees are almost always compensated by the seller in any transaction where there is a cooperative Broker agreement. In other words, my services are at no out of pocket expense to the purchaser under most circumstances! No Retainer Fees and No Buyer Agreements to sign.
|
