The Real Folsom Blog

These 10 Steps Will Help Prepare You for Homeownership

I've seen it before. People will spend hours researching and getting ready for a trip abroad or go through stacks of Consumer Reports mags before buying a car or an appliance. Yet, when it comes time to buy a home, these same people will start their search with little more than a vague notion of what they need in a a house and without talking first to a lender or mortgage broker to get a solid understanding of what they can afford and what the costs of homeownership actually cover. Here are 10 steps that will help you prepare to become a first-time homeowner:

1. Decide how much home you can afford. Start your search by talking to a mortgage broker or lender you trust. They will help you understand not only what you can comfortably afford but also will help you calculate all the costs of owning a home. Generally, you can afford a home equal in value to between two and three times your gross income.

2. Develop a wish list of what you’d like your home to have. Then prioritize the features on your list. This is especially important if more than one person is involved in the homebuying process. Couples, for example, may think they're on the same page when it comes to what they want in a home, but then find out (painfully at times) that each has different goals.
3. Select three or four neighborhoods you’d like to live in. Consider items such as schools, recreational facilities, area expansion plans, and safety.
4. Determine if you have enough saved to cover your downpayment and closing costs. Closing costs, including taxes, attorney’s fee, and transfer fees average between 2 percent and 7 percent of the home price. As in step 1, a trusted lender or mortgage specialist will help with this.
5. Get your credit in order. Have your mortgage specialist obtain a copy of your credit report. Then review it together to see if there are ways for you to improve your credit so you can get the best interest rate possible when you apply for your loan.
6. Determine how large a mortgage you can qualify for. Also explore different loans options and decide what’s best for you.
7. Organize all the documentation a lender will need to preapprove you for a loan. Your lender will give you a list of the documents you will need. Better to be prepared early with this. Trying to find pay stubs or tax returns once you are in escrow and already packing to move out will be challenging. So just do it early on.
8. Do research on your own to determine if you qualify for any special mortgage or downpayment-assistance programs.
9. Understand all the costs of homeownership, which include property taxes, special taxes like Mello Roos, insurance, maintenance, and homeowners association fees, if applicable.
10. Find an Realtor you trust and are comfortable with. This person will be able to help you throughout the process. Especially in this market flooded with short sales and bank-owned properties, you want someone who knows the local market and real estate trends.

Follow these steps and you should at least be better prepared for owning a home.

Hoping for a $15,000 Home Buyer Tax Credit?

There's no crystal ball when it comes to what happens when the First-Time Home Buyer Tax credit is set to expire in November. But guest blogger Barbara Van Duyn updates us on efforts to extend and increase it. Barbara is a certified mortgage planner with First Priority Financial. If you have any mortgage questions, you can reach Barbara through her Web site, www.BarbaraVanDuyn.com.

As we approach the November 30, 2009, deadline to qualify for the $8,000 First-Time Home Buyer Tax Credit, some buyers are asking me if I think it will be extended beyond November. Then there’s talk the tax credit could increase to $15,000?

I have no clue what Congress will do when the tax credit expires. Existing home sales are showing signs of improving and the public is getting tired of Washington’s deficient spending spree. Time will tell. What I do know is that Senator Johnny Isakson, R-Georgia, introduced two bills this year to amend the tax credit and extend it to all home buyers while increasing it to $15,000. Both attempts were unsuccessful with the most recent failing to pass this month. Go to Senator Johnny Isakson's Web site  to learn more. That’s it for now. Until the next time, take care. Barbara

More on Less Trauma When Home Buying

Continuing on yesterday's topic of ways to reduce the stress and trauma of buying that first home: on the financial side, it's a good idea to not wait till you have an accepted offer on a house to get the financing finalized. If you're serious about buying, go ahead and get pre-approved (not just pre-qualified). It'll make your offer look that much more attractive and will enable you to focus on issues like inspections and review of the many seller disclosures you will receive. Also, make sure you consider setting aside a maintenance and fix-the-broken-stuff budget. Owning a house is not just about the mortgage. Even when buying a newer home, things have been known to break right after close of escrow, so it's worth planning a little something in the budget for those unexpected repairs. And, finally, don't obsess about appreciation. First find a home that you love, then consider how its value might hold up long-term. According to the National Association of Realtors, U.S. homes appreciated an average of 5.4 percent annually from 1998 to 2002. That's not bad. But more important is that your home be a comfortable, safe place to live.

Home-Buying Doesn't Have To Be Traumatic

Let's face it home-buying can be stressful even traumatic if things start going wrong. There are things you can do to make your home-buying experience less traumatic. The first step is to make sure you are working with an agent you are comfortable with and that you trust. Another biggie, I've seen too often is buyers obsessing about whether they are getting the best rate possible on their loan. Same as with the agent is find a lender you trust, work through the numbers then put that decision behind you once made. Then, don't keep talking to every soul you meet asking them their opinion about the market or your real estate search. It's natural to be looking for reassurance on such a big decision but too many opinions (some of which won't be well-informed) make decision making too difficult. Also, go for a win-win when negotiating the purchase. If your offer is not also a "win" for the seller, you may wind up losing out on the home of your dreams because you were trying to get a too-good deal. Tomorrow, I'll look at some more tips to help you keep trauma at bay when making that home purchase. Enjoy the sun!

Keep Both Eyes Open for These Hidden Home Defects

No home is flawless (even in our lovely Folsom), but certain physical problems can be expensive. Those of us who have owned several homes have learned probably the hard way about these hidden home defects that can explode like tiny time bombs at the worst time. First-time home buyers in particular should train themselves to look for the following signs as they go about their home search:

1. Water leaks. Look for stains on ceilings and near the baseboards, especially in basements or attics.

2. Shifting foundations. Look for large cracks along the home’s foundation.

3. Drainage. Look for standing water, either around the foundation of the home of in the yard.

4. Termites. Look for weakened or grooved wood, especially near ground level.

5. Worn roofs. Look for broken or missing copings and buckled shingles as well as water spots on ceilings.

6. Inadequate wiring. Look for antiquated fuse boxes, extension cords (indicating insufficient outlets), and outlets without a place to plug in the grounding prong.

7. Plumbing problems. Very low water pressure, banging in pipes.

Final thought: you should always, always have a home inspection done before you purchase a home. Several of the problems above would be flagged by a competent licensed home inspector. And, if problems were identified, you would then want to have a specialist come in to evaluate the problem and give you an estimate on what it would cost to repair.

Tips Especially for the First Time Folsom Homebuyer

So you've made the big decision: You're going to become a first-time Folsom home owner. The prospect can be quite daunting and there are a lot of questions: What's the best kind of home for you, what's the best kind of financing, how will you know you're not buying a lemon. One thing is for sure, starting the process prepared will help make your journey to home ownership a far more pleasant one. Here are some tips especially for you, the first-time homebuyer.

1. Be picky, but don’t be unrealistic. There is no perfect home.

2. Do your homework before you start looking. Decide specifically what features you want in a home and which are most important to you.

3. Get your finances in order. Review your credit report and be sure you have enough money to cover your downpayment and your closing costs.

4. Don’t wait to get a loan. Talk to a lender and get prequalified for a mortgage before you start looking.

5. Don’t ask too many people for opinions. It will drive you crazy. Select one or two people to turn to if you feel you need a second opinion.

6. Decide when you could move. When is your lease up? Are you allowed to sublet? How tight is the rental market in your area?

7. Think long-term. Are you looking for a starter house with the idea of moving up in a few years or do you hope to stay in this home longer? This decision may dictate what type of home you’ll buy as well as the type of mortgage terms that suit you best.

8. Don’t let yourself be “house poor”. If you max yourself out to buy the biggest home you can afford, you’ll have no money left for maintenance or decoration or to save money for other financial goals.

9. Don’t be naïve. Insist on a home inspection and, if possible, get a warranty from the seller to cover defects within one year.

10. Get help. Consider hiring a Realtor as a buyer’s representative. Unlike a listing agent, whose first duty is to the seller, a buyer’s representative is working only for you. And often, buyer’s reps are paid out of the seller’s commission payment.

The American Dream in Folsom

The American Dream of owning a home can be particularly challenging in a sought-after community like Folsom. The very factors that make Folsom so appealing--its great stores, restaurants, recreation venues, nice homes, historic old town, location near Folsom Lake, etc., etc., etc.--are part of what drives up the cost of homes here. Anyone planning to buy a home in Folsom should first devote some time to getting their finances in order to make sure they get the most house they can. Doing so can result in lower mortgage payments and therefore the ability to buy more home. This is especially true for first-time home buyers. The National Association of Realtors offers these eight steps to getting your finances in order:

1. Develop a family budget. Instead of budgeting what you'd like to spend, use receipts to create a budget for what you actually spent over the last six months. One advantage of this approach is that it factors in unexpected expenses, such as car repairs, illnesses, etc.
2. Reduce your debt. Generally speaking, lenders look for a total debt load of no more than 36 percent of income. Since this figure includes your mortgage, which typically ranges between 25 percent and 28 percent of income, you need to get the rest of installment debt--car loans, student loans, revolving balances on credit cards--down to between 8 percent and 10 percent of your total income.
3. Get a handle on expenses. You probably know how much you spend on rent and utilities, but little expenses add up. Try writing down everything you spend for one month. You'll probably see some great ways to save.
4. Increase your income. It may be necessary to take on a second, part-time job to get your income at a high-enough level to qualify for the home you want.
5. Save for your downpayment. Although it's possible to get a mortgage with only 5 percent down--or even less in some cases--you can usually get a better rate and a lower overall cost if you put down more. Shoot for saving a 20 percent downpayment.
6. Create a house fund. Don't just plan on saving whatever's left toward a downpayment. Instead decide on a certain amount a month you want to save, then put it away as you pay your monthly bills.
7. Keep your job. While you don't need to be in the same job forever to qualify, having a job for less than two years may mean you have to pay a higher interest rate.
8. Establish a good credit history. Get a credit card and make payments by due date. Do the same for all your other bills. Pay off the entire balance promptly.

Make it a great day!

Seven Good Reasons To Own A Home

Rain in July??? What's going on here. At least it's nice to have some cooler temps. From what the weather reporters reported this morning, enjoy it while it lasts as it looks like we're shooting back up to 100 within a week!

Today I thought I'd talk about some of the reasons becoming a homeowner makes sense. Some are obvious, some are less so. Here are seven reasons I think it makes sense to own a home:

1. You get a tax break from Uncle Sam in that the U.S. Tax Code lets you deduct the interest you pay on your mortgage, property taxes you pay, and some costs involved in buying your home.
2. Although it's not obvious in our current market, home appreciation is another reason to purchase. The market is slower right now but time has shown that overal real estate does appreciate in value.
3. Equity is another good reason to buy. When you rent, the money you pay every month is gone for good. With mortgage payments you build equity ownership interest in your home.
4. Building on top of that is the savings factor. The equity you build up is a "ready-made savings plan. And when you sell, you can generally take up to $250K (or $500K per couple) as gain and not owe any federal income tax.
5. The next three reasons are less obvious or at least not thought of as often. One is the predictability factor. Unlike rent, your mortgage payments don't go up every year so over time your housing costs may actually decline. What will rise are property taxes and insurance costs, however.
6. One big plus of homeownership is the freedom to decorate your home as you want. Plus, improving your home is an investment you can enjoy while you live in the home.
7. Finally, being in a home for many years brings you and your family stability. It gives you the chance to get to know your neighbors and participate in community activities.

As you can see there are good reasons to own. I hope this helps.