Buying Your First Home:
Buying the first home is everybody’s dream. It’s probably the largest financial transaction that you will make in your life for the most of you.
Buying a home can be an emotional, time consuming, and complex process. There are a few things that you can do to help make the process go as smooth as possible.
How much a Home can I afford?
Before going out to see homes, it’s important to find how much loan you can qualify for. The lenders and banks have a tight lending policy due to the recent credit crunch.
It is important to get pre qualified by a mortgage broker or bank.
Credit
Credit is an unavoidable factor when purchasing a home. When a person reach USA there should be no time wasted in establishing a credit. Start by obtaining a secured credit card and then eventually applying for more credit cards as soon as you can get them. This is because length of credit history, in addition to credit scores is an important factor. Making all purchases with your credit card and paying off periodically will help to increase your credit score. A decent credit score with enough history (minimum 2yrs.) will help you to get the best rates when purchasing your home.
Mortgage)
The best scenario for a mortgage is 20% down, with 2 year work history and 2 year credit history in the U S. 100% loans are still available although the rate may be slightly higher and require paying mortgage insurance. Any amount of down payment will reduce the PMI payment.
100% loan is available for First time home buyers.
The popular 80/20 loans are discontinued by most of the lenders. You can obtain 80/15/5 or 80/10/10, 5&10 being the down payments respectively and avoid paying PMI.
Mortgage Brokers vs. Banks
A mortgage broker usually works for a mortgage Company which is approved to conduct business with a large number of lenders and banks and have a wide verity of programs available, where as a bank is limited to its list of programs only.
Realtor’s Role
Real estate brokers and sales people have access to an inventory of properties for sale through the MLS (multiple listing services). This enable them to find you the best home matching your criteria and location. Usually an experienced and informed realtor in today’s market can bring you the best deal with his negotiation skills.
Down Payment
Although 100% loan programs are still available with full documentation, it is getting tougher in today’s market. Mostly all lenders have discontinued the popular 80/20 program in which you could avoid the mortgage insurance and still get 100% financing. In today’s market a down payment can get you a better rate and lower or no PMI (private mortgage Insurance). Even a 5% Down payment will save you money on your loan with 20% down saving you the most.
Interest Rates
Interest rates have been historically low recently. A 30year fixed mortgage is any where from 5.5% to 6.00% at this time. If you shop around you will get different rates from different lenders. Usually a mortgage broker can get you a lower rate than a bank like Bank of America for example.
PMI (Private Mortgage Insurance)
Any loans with more than 80% LTV (loan to value) is required to have mortgage insurance. It decreases with the amount you put down. With 20% down payment you don’t pay mortgage insurance. The PMI can be removed when the loan to value reaches 80% by paying towards principal or property appreciation. Mortgage insurance paid is tax deductible.
Foreclosures & short sales
Usually foreclosure properties need work. Most of these homes have been abandoned or evicted. Not all foreclosures are great deals. In today’s market conditions, you can buy an upgraded home in move in condition for a very reasonable price where as a foreclosure will need money and time to move in because mostly all of them need repairs. In addition fore closures and short sales tend to take a long closing where as the usual closing takes 30 days.
Property
Unfortunately here in Florida mostly all of us have to buy an existing home. For a young family, schools and distance to work is an important factor to look at when finding a home. It is often impossible to find a home that fits 100% of what you have in mind. The property you want to buy should fit your needs.
You pay a higher price if you are looking for a perfect home. Some people prefer a two story homes to a single story home. Due to the real estate boom in the lat 90’s and early 2000’s, most of the average homes built lack space. A two story home built within the last 10 years probably will have more space than a single story. A draw back for the average 2 story home is that it may not have any bedrooms downstairs. If you have older parents living with you who may have problem using the stairs, you may want to consider a single story home. If you want to sleep during the day and have kids probable a 2 story is better and 2 stories tend to have more space.
If you have a lower budget, a Town home or a Condominium may be an option.
Schools
For young families living within an excellent school district is very important. You may not be able to sell your home and move easily in all the market conditions. So it is very important to live in a good school district if you have kids. In Broward county most of Cooper City, Davie, Pembroke Pines and Coral Springs have public schools with excellent grades
Community
Most of the homes are in communities. Each community has its own maintenance fees which are usually paid monthly. Usually a gated community has higher fees. Some communities have higher fees and fewer services offered. It is important to look at how much are the fees and what services are included before purchasing a home.
Rent vs. Own
Being a home owner will give you the pleasure of living in the home of your choice for you and your family. Money paid in rent is cannot be recovered where as if you own a property, part of your monthly mortgage payment is towards principal and will be returned when you sell the property. Also a market appreciation will build equity in your home.
Tax Benefits
There are various tax benefits when you own a home than rent. Interest, tax and mortgage insurance payments are tax deductible.
When to buy my first home
If you don’t own a home and you have 2 year work and credit history in the US, probably this is the most favorable time to buy a home.
The market can change in a dime and all the privileges enjoyed by buyers can be limited when a market change occurs. Also you cannot predict interest rates. So if you don’t own a home and is qualified this may be the right time.
By: Thomas Pullattu
Professional Realty & Mortgage
954-572-1200-office
954 -559-8844-cell
Tom@ThomasPullattu.com
www.eIndianInfo.net