Category: First Time Buyers

Home Buying and Financing

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First-time homebuyers often feel at a financial disadvantage when considering buying a home. Homeownership can seem daunting, whether it’s not having the money for a down payment, student loans and other monetary limitations or securing a reasonable interest rate on a mortgage. The good news is historical data regarding interest rates provides a favorable outlook for borrowers, and first-time buyers can take advantage of several benefits when buying a first home.

Interest Rates Over Time

Interest rates go up and down over time. Data collected over time indicates that interest rates today are about the same as 20 years ago. And rates are less than half what they were 40 years ago. How does knowing this help? Buyers shouldn’t feel stuck with today’s interest rate for the life of a mortgage. Rates will change, and buyers can make changes then, too. 

Refinancing Options

Since interest rates fluctuate regularly, buyers can consider refinancing when the time is right. Buyers can swap the higher mortgage rate for something more favorable if interest rates go down. This may mean a monthly payment stays the same, but the years left on the mortgage could be dramatically reduced. 

First-Time Buyer Benefits

There are a variety of government and state-funded programs that can help pave the way for first-time buyers. According to the Department of Housing and Urban Development, the following qualify as first-time home buyers:

  • A person who has not owned their principal residence for at least three years
  • A single parent who previously co-owned a home while married
  • A homemaker who once owned with a spouse but no longer receives financial support from that spouse
  • A person who has only owned a residence not affixed to a permanent foundation, such as a mobile or trailer home

Several programs make homeownership more affordable for eligible buyers by including lower interest mortgage rates or lower down payment requirements.

  • First-time homebuyer programs for students – Available if you recently graduated from college.
  • Energy-efficient mortgages (EEM) – This type of mortgage allows you to tack the cost of energy-efficient upgrades (think new insulation, a more efficient HVAC system or double-pane windows) onto your primary loan without requiring a larger down payment.
  • First-time homebuyer programs by state – Each state operates a housing finance authority (HFA) that encourages homeownership, among other responsibilities. 
  • Habitat For Humanity – If your annual income is 60 percent or less of the median income in your area, you might qualify for Habitat for Humanity’s homeownership program. Along with not exceeding the income threshold, you’ll need to contribute sweat equity​​ to help build the home or a home for another applicant to qualify.

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First-Time Home Buyers

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As interest rates are starting to come down, it’s a great time to be looking to purchase your first home. Consider these top ten reasons why being a first-time home buyer is great.

Build Equity

Building equity means investing in something you own rather than paying money each month on rent without owning the property. When you make monthly mortgage payments on the property you own, you own more and more each month. In the future when you sell your first home, you’ll have money left over after paying off the mortgage that can be used as a down payment for your next home. Your money works for you when you pay a mortgage rather than rent.

More Privacy

A home is more private than renting an apartment and sharing a bedroom wall with a neighbor you don’t know

Find A Smaller Starter Home

Begin small. A home with less square footage usually means a smaller mortgage and smaller utility bills. When it’s time to sell that first home, you can use the money you get from the sale to buy a larger or higher-priced home,

Establish Credit

Getting a mortgage loan at a young age can help you establish a solid credit history, which means a good credit score and ample financial opportunities down the road.

A First Home Is Not A Forever Home

According to the United States Census Bureau, the average person will move as many as 11.7 times. So don’t stress to find the perfect home the first time around. Look for a home that is best for now.

Remodel As You Go

Make your house a home. Freshen the landscape to add curb appeal. Swap out the windows for more energy-efficient versions. Add a deck to expand your outdoor living space. Projects like these will increase property value while personalizing your home.

The Yard

Imagine the possibilities. Space for the dog to run. Your own vegetable or flower garden. Naps outside in the hammock. Room for a firepit. A spot for the family snowman.

Tax Incentives

Homeownership has several potential tax benefits that might lower your tax burden and increase your annual refund.

Feeling Of Achievement

Homeownership is an accomplishment that is worth the time and energy required to plan and succeed.

You Can Refinance Later

Interest rates are constantly changing. If interest rates go down in the future, you can swap your higher rate for something more favorable. Sometimes, you can keep your monthly payment the same but dramatically reduce the years left on your mortgage. Don’t feel stuck with today’s interest rate for the next 30 years.

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Understanding The Cost Of Homeownership

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You’re thinking about becoming a homeowner for the first time. What steps do you take in preparation, and what are some homeownership costs? 

Start With A Plan

Start by creating a realistic budget. Jot down your current expenses like car loans, monthly credit card payments and grocery expenses. But what new costs will you need to account for? 

  • Property taxes – Search local tax records on like properties to get an idea of the cost.
  • Homeowner’s insurance – A Mel Foster insurance agent can provide an estimate.
  • Utilities – Credit counseling agencies claim that owners spend 5-10% of their annual income on utilities, including electric, water, gas, garbage, cable and streaming.

Prepare So You’ll Be Ready

Take steps that will simplify the buying process when the time is right to begin your search.

  • Find a Mel Foster Co. agent and communicate what you’re looking for.
  • Continue to set money aside, so you have a down payment.
  • Check your credit score and work to improve it. 
  • Get pre-approved for a mortgage so financing won’t hold up a sale down the road.

Financial Assistance Programs Are Available

First-time buyers often have access to state programs, tax breaks and federally backed loans that can be approved even if you don’t have the minimum down payment. For example, take time to search DPA (Down Payment Assistance) loan options that can help cover the upfront costs of a down payment. Government-sponsored and private programs can help you pay closing costs, which often represent 3-6% of the total loan amount.

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Tips for First-Time Home Buyers

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Buying your first home at any age, even at the average U.S. age of 33 years old, can be time-consuming and stressful. Follow these practical tips to reduce your stress and make your first home purchase easier:

  1. Determine your budget and stick to it.

Start by using an online mortgage calculator to determine the maximum monthly payment you can afford. This figure will be based on the price of the home after you apply a down payment for a 30-year-mortgage. Don’t forget to include maintenance costs and property taxes in this figure. Enlist your mortgage loan officer as a free professional to help you arrive at your targeted budget figure.

  1. Make a list of non-negotiables.

Share this list with your agent so she shows you homes that are a match for your must-have list. View homes that are both above and below your budget to see how values differ with features and location. Reevaluate your list as you gain a better sense of what’s out there and what is really important to you.

  1. Use an agent.

Start by asking friends and family who live in your area of interest for recommendations for an agent. A good agent has knowledge of the area and current market conditions that will streamline your search. Your agent will be in your corner from start to finish and her experience will help connect you to qualified loan officers and real estate attorneys that will ultimately aid in the process until closing.

  1. Don’t skimp on house hunting.

Take time to visit as many houses as you can until you have a clear sense of what you’d like to purchase. Visit several neighborhoods to get a feel for traffic flow and proximity to places you frequent like a grocery store, school, restaurants, etc. Allow your agent to work for you to set up showings that match your wish list and then set aside the time to look at them all.

  1. Don’t forget about closing costs.

Closing costs, which don’t include your personal packing and moving costs, can vary widely. Common costs include the price for hiring a real estate attorney to look over your buyer-seller agreement and a home appraiser to evaluate the home before the sale. Don’t forget mortgage insurance and fees, homeowner’s insurance, property taxes and recording fees as closing costs to factor in. Your agent’s commission is paid by the seller, and not by the buyer, so allow your realtor to help you in as many ways as she can during your home search.

Find a professional, experienced agent in your target area and get your home search started.

 

Three Ways to Make your Home Appeal to Millennials

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What we look for in a home.

It can be difficult to appeal to millennial homebuyers’ tastes, but recent polling has provided some insight into what they’re searching for in their first home.

  1. Leave Room for Improvement

Many millennials are looking for a fixer-upper for their first home due to their limited budgets. HGTV has made remodeling more accessible than ever, and millennials want to renovate their houses into their own dream homes. In 2017 first-time homebuyers spent an average of $33,800 on home renovations.

  1. Have a Separate Laundry Room

Millennials are willing to sacrifice comfort for extra square footage dedicated to a laundry room. Every year surveys taken on millennials’ buying choices point toward this trend. It’s a small change that can make your home significantly more attractive to this group of buyers.

  1. Be Environmentally Friendly

Offer a house that includes green features. Millennials look for LED lighting, double paned windows or even solar panels. You don’t have to make a major investment, but even updated, energy-efficient appliances will attract buyers. It’s not only trendy and good for the planet, but will also save money in the long run.

Want more expert advice on how to market your home to the most buyers? Ask a Mel Foster Co. agent.

 

Finding Your Perfect First Home

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First Home

It can seem daunting when searching for a new home, especially as a first time buyer. Here are a few tips to help you prepare for finding your new home.

  1. Determine a Budget

Creating a budget before looking should be your top priority. Focus on both the down payment you have saved and earmarked to buy your home and the monthly mortgage and insurance payment first. It’s best to estimate on the higher end and then try to keep expenses as low as possible.

  1. Determine Needs and Wants

When buying a starter home, carefully choose the features you need and not just those you’d like to have. Do you want more space or to be closer to work? Create a list and try to check off as many as you can when viewing a home. But don’t confuse wants with needs.

  1. Consider All Properties

View as many homes as possible. You’ll learn what you like, what you don’t like and may even come away with a few interesting ideas for your final choice. Be sure to keep a journal or list so you’re able to reference the data later. It can get very overwhelming to keep home attributes straight after a few weeks of searching.

  1. Work with a Professional

Avoid the hassle of tracking new listings and scheduling showings and consider working with a Mel Foster Co. agent instead. There is no cost for the buyer, and you’ll have someone in your corner with industry knowledge and experience. Contact an agent today.

Avoid these Mistakes When Buying a Home

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Are you making these mistakes?
Are you making these mistakes?

Buying a home isn’t always easy, especially for first time buyers. Knowing the more common mistakes will cut down on stress during the process.

  1. Not Seeking Professional Guidance

Starting the home buying process alone isn’t a good idea, especially if it’s your first time buying. Hiring an agent is a smart choice to help with the home search, negotiations, finances and closing. Agents are an incredibly valuable asset for any home buying situation.

  1. Missing Hidden Costs

Property insurance, taxes, maintenance and utilities are costs often forgotten during the excitement of buying a new home. Keep in mind these costs generally increase every year. Even if you can afford it now, ask yourself if you can afford it in the future.

  1. Skipping the Loan Preapproval Process

Being preapproved for a mortgage helps narrow your home search by directing you to homes within your budget. Talking to someone in advance will help set realistic expectations, and offer peace of mind knowing what homes will fit your budget appropriately.

  1. Depleting your Savings

It may seem as though you have the perfect amount of money in your savings to buy your home and move in, but if you’re emptying that account to buy a home, it means the home is too expensive. Ideally you’ll have saved enough money to buy your home, move and cover expenses for six months without pay. This is a safety net if you lose your job, so don’t blow all of your money on a home you can’t afford.

  1. Making Large Purchases after Closing

Celebrate buying a home with major purchases before closing may seem exciting, but lenders check credit scores to be sure your financial situation hasn’t changed. Putting new furniture or appliances on a credit card before your closing date may negatively affect your credit score. And adding new loans may jeopardize the original mortgage you were hoping to receive. Don’t learn this lesson the hard way and have this mistake cost you the home you were counting on.

Cut Your Taxes.

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Tax Deduction Tips
Tax Deduction Tips

Tax time will be here before you know it. When filing your taxes, don’t forget about any home-related deductions you can take.  Talk to a tax expert if you have questions.

  1. Mortgage Interest Deduction

To obtain the mortgage interest deduction, your mortgage must be secured by your home. Interest you pay on a mortgage of up to $1 million, or $500,000 if you’re married filing separately, is deductible when you use the loan to buy, build, or improve your home in any way.

  1. Prepaid Interest Deduction

Any interest you paid during the time of signing your mortgage is almost 100% deductible in the year you paid it, along with any other mortgage interest paid. If you refinance for a 10-year mortgage, paying $6,000 in interest, you can then deduct $600 per year.

  1. Property Tax Deduction

When you pay your real estate property taxes, you can usually deduct these from your tax return. If you bought a house this year, check your HUD-1 settlement statement to see if you paid any property taxes when you closed on your home.

Guide For Finding The Right Listing Agent.

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Ask the right questions.

You’re ready to sell your home. You want top dollar, a fast sale and a great real estate listing agent. The best way to find the right agent is to interview three and ask these questions.

How much will my house sell for?

The three agents should be fairly close in their estimates. Beware of an agent who is suggesting a price that seems high compared to the other two prices. This may be a ploy to get your listing and usually ends in disappointment.

How will you market my listing?

Mel Foster Co. agents have a wide range of marketing tools available including local and national online sites, an app and more traditional vehicles like newspapers, magazines and flyers. Choose the agent who you feel will do the most to market your home.

Do you have a specialty?

If you’re a millennial first time buyer, an agent who specializes in seniors may not be the right fit for you. Also ask what listings each agent has in your desired neighborhood.

What do you expect of me?

This is where you’ll get honest feedback about your home. A great agent will have no reservations telling you to do some paint touch up or have your carpets professionally cleaned. Your agent should offer staging ideas that will help your home attract more potential buyers. An agent who is sincerely interested in working hard on your behalf will have recommendations to get your home open house ready.

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