Show Me the Money - Step One to Home Ownership

Its 2010! A New Year and a New OPPORTUNITY to determine what kind of real estate investment works best for you! You resolved to make a new start to purchase property and become part of the 70% of American households that are homeowners.


Homeownership definitely has its advantages. It is an opportunity to build wealth through home equity and appreciation; it provides tax benefits and it makes you the final decision maker and “ruler of the castle” for the property you live in. This STEPS TO HOME OWNERSHIP series will provide some information that will help you determine if now is the time for you to purchase a home or stay a renter.


Step One: Finances – Show me the Money!


To purchase a home you need cash or a mortgage loan. Cash can be sitting in your bank account, in a line of credit, or in a financial security that can be liquidated or borrowed against. As a potential buyer you can also borrow money from financial institutions or private investors to fund the purchase of the property. Given all the recent defaults in the mortgage market, lenders are now being more responsible to potential buyers by sticking to more consistent standards in qualifying potential home buyers and disclosing costs associated with getting a loan to purchase a home.


The three key things considered by the lender in the loan approval process are: 1) the credit score; 2) the monthly debt-to-income ratio; and 3) cash on hand or access to cash to pay costs associated with the purchase of the home. *

1. Credit Score - Many people do not have a clue of their true credit score. To purchase a home, or even to rent, a credit report is required. The lender will ask you to provide your social security number so they can pull your credit report as the beginning step in your home purchase process. If you are not seriously looking for a home and just want to know your score, you can request a free credit report once a year with no impact to your score. Unlike consumer credit inquiries, you can have your credit pulled by a financial institution multiple times in a 30 day period while you are shopping for a home loan and it will not affect your credit score.

Most lenders are looking for a credit score of at least 620 or above. If your score is below 620, it is an opportunity to see what items on your credit report require your attention to bring your score up. There are numerous free and paid credit counseling agencies that can assist in this area.

For most lenders, the credit score is the initial criteria used to determine if you will be able to move forward in the loan approval process to finance the purchase of a home.

2. Debt-to-income ratio – After the lender has pulled your credit and determined they can begin the loan process for you, they will require a loan application and various documents to verify your income. This may include 3 months of pay stubs, your last 2 years W-4s, and a list of your current credit obligations. This information is reviewed and one key area the lender is looking at is your debt-to-income ratio. Simply put it represents your monthly obligations as a percentage of your monthly income. There are many ways to approach this…but one way is taking the things that make up your mortgage payment, PITI= principal & interest, tax & insurance and dividing that by your income. If PITI/income is 45% or less, this leaves a little over half your monthly income to cover other expenses.

As a new home owner, you really don’t want to pay your monthly income for a mortgage and after other expenses, like food, water, gas/oil, electricity, phone, transportation (car note & gas), cable, internet, and entertainment….you have ZERO funds left over for things like travel, entertainment and yes emergencies. You may love the idea of owning your home, but if this percentage is too high, under current guidelines, the lender will not be able to lend you the money if your ratios are too tight.

On the flip side, the lender may approve you for a loan based on basic recurring expenses and income, but there may be other expenses like entertainment & travel which are not readily reflected. Don’t leave it all to the lender. Preparing a budget is a good step to make sure you have considered all the expenses that are important to your lifestyle when deciding the affordability factor for your new home.

3. Cash Needed to Purchase - A minimum of $2000 cash on hand is a good estimate of upfront funds to get started. These funds cover your deposit, given at the time of contract signing (please note that the deposit can range from $1000 to 10% of the purchase price); the cost of your home inspection; and the cost of your lender appraisal of the home. Let’s call these upfront costs.

Add to that your down payment. For the three most common loans expect a minimum of 0% of the purchase price for a VA loan; 3.5% for an FHA loan; and from 5%-20% for a conventional loan.

And lastly you will need money for closing costs which may include one year’s worth of home insurance, at least 3 months of taxes, title insurance, and lender fees. This can add up to 3% to 6% of the cost of the home. Your lender should provide you with a “Good Faith Estimate” of the costs to purchase a home. This estimate should be updated once you select a specific property and you know the exact taxes, insurance and title information related to the property you selected.

Finances play a key role in the purchase of a new property. The lender is the professional who will review your financial information and talk with you in detail about your purchase options, including the type of loan and the interest rate for the loan. The lender will be able to answer all the questions about your loan. The lender will also provide a preapproval letter and ultimately a loan commitment letter to your realtor. This letter lets your realtor know that you are ready to begin looking for homes in the price range determined by you and the lender.

For more information: I am your one stop shop to exploring your financing options!

Clara Lyons
I turn real estate dreams into reality – One home at a time!
856-264-1058
ClaraSellsHomes@gmail.com

*The figures quoted in this blog are estimates. The info presented is a snapshot of some factors used by lenders and is not intended to represent all the factors taken into consideration in the loan approval/credit rating process. There are a range of loan options and programs. Each financial institution reserves the right to establish financial guidelines and credit worthiness.

HAPPY NEW YEAR

2009 went by too fast..and I am looking forward to a FABULOUS 2010.

Thank you to all my clients, associates and friends.

I am looking forward to 2010 and helping at least 100 people purchase or sell their property!

Peace and Love
Clara
I turn real estate dreams into reality - One home at a time!

Contact me for your next real estate transaction

Home Buyer Tax Credt Extended and Improved!

Moments ago, President Obama signed a bill to extend unemployment insurance benefits. The bill also created a new tax credit that applies not only to first-time buyers, but to existing homeowners who have lived in their residence for at least five years. The credit for first-time buyers remains at $8,000, and is $6,500 for eligible repeat buyers.

In addition to including move-up buyers, the new tax credit also contains many improvements over the existing one. These include higher income thresholds and two different tax credit deadlines -- one for getting under contract and one for closing the transaction.

This legislation is significant, and will give the housing industry the additional support we need to keep the real estate recovery going.

For more info:
http://www.realtor.org/home_buyers_and_sellers/2009_first_time_home_buyer_tax_credit

Now is the time to BUY and SELL property.

OPEN THIS WEEKEND - Come By:
330 Whethersfield Dr, Glassboro NJ 08028
313 Alfred Ave, Glassboro NJ 08028

For SALE:
320 Chestnut, Woodlynne NJ
206 Mercer, Gloucester City NJ
117 Slack Ave, Lawrenceville, NJ (55+ only)

Call Clara Today 856-264-1058

California Association of Realtors Calls for the Extension of the Tax Credit

C.A.R. calls for swift adoption of Dodd-Lieberman-Isakson amendment to extend home buyer tax credit LOS ANGELES (Oct. 23) – The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) today called for the U.S. Senate to swiftly adopt the Dodd-Lieberman-Isakson amendment, which would extend and amplify the hugely successful first-time home buyer tax credit until June 30, 2010.

“The success of the home buyer tax credit and its positive impact on the real estate market is clear,” said C.A.R. President James Liptak. “According to our research, nearly 40 percent of first-time buyers said they would not have purchased a home if the federal tax credit for first-time home buyers was not offered. This underscores the significance of the federal tax credit to the housing market’s recovery in California.

“The Dodd-Lieberman-Isakson amendment would expand the credit by removing the first-time buyer requirement and instead would apply to all home buyers,” he said. “The amendment also would increase the qualifying income limits to $150,000 for single buyers and $300,000 for those filing joint income tax returns.

“We urge Senators Feinstein and Boxer to demonstrate their support for home buyers in California and quickly adopt the Dodd-Lieberman-Isakson amendment,” Liptak said.

Under additional provisions in the Dodd-Lieberman-Isakson amendment, taxpayers would be able to claim the credit on purchases completed in 2010 on their 2009 income tax returns. The amendment maintains the provision that home buyers do not have to repay the credit provided the home remains their primary residence for 36 months after purchase, and waives this requirement for active duty military personnel who move due to a military order.


SOURCE: CAR newlsletter: Leading the way…® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States, with nearly 163,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

Looking to Buy or Sell real estate - CALL CLARA 856-264-1058

Let me look in my crystal ball

Every other day I get asked "How is the market"? "Are home values going to go up?" "Will interest rates get lower?" "How long will it take for my house to sell?" and a host of questions along this line...My response " Let me look in my crystal ball." LOL.

While I wish I had the power to tell the future...My guess is as good as anyones...And if history is any indicator...Property values continue to demonstrate an upward trend over time...(that means if you look at most 10 year periods, despite all the ups and downs, the ups win). :)

Buying a home is still a good investment for 3 key reasons:

1) Tax Incentives - the tax code allows for write offs or cash back each year for home owners.

2) Equity - the difference between what you paid and what your home is worth can be cashed out or borrowed against during your ownership or at sale; and

3) Ownership Autonomy - You are in charge and grant permission for any changes to the property - occupancy issues (tenants or guests); painting; and remodeling - any idea you have to rearrange/tear down/or build up the property.

So when I look in my crystal ball, I see you calling me to assist you or someone you know with that next property transaction.

Call Clara 856-264-1058

First Time Home Buyer Tax Credit

The $8,000 Tax Credit for Home buyers expires November 30, 2009. Act now to take advantage of this great opportunity. Click on the link below for Q&A's on the program.

http://www.federalhousingtaxcredit.com/2009/faq.php

Call Clara TODAY at 856-264-1058 to take advantage of this opportunity.

Open House - 313 Alfred Ave Glassboro NJ Sunday Oct 25 1-4pm

This home is very nice! Located in Glassboro, New Jersey in a newer development called Rolling Greens, rightfully named as the green lawns seem to go on forever, this home is the perfect marriage to the term HOME SWEET HOME. The landscaping provides a nice screen of the porch that runs the length of the front of the home. The porch provides a nice view of the beautiful homes that line this peaceful street.

313 Alfred Ave can be your home in time for the holidays! This 3 bedroom colonial has 2 baths on the upper levels; one in the master suite and an additional half bath on the main level. A must for busy families, Alfred has both a formal dining room and a large eat in kitchen with room for informal meals or family projects. Adding to family time, the family room is a step down from the kitchen and the open floor plan continues to the large wood deck for more indoor/outdoor family fun!

It does not stop there…..There is MORE SPACE downstairs in the basement. Use your imagination….More family space? Another bedroom? You decide. Check out the lower right pictures.

313 Alfred Ave is calling out to you - HOME SWEET HOME

Can't attend the Open House? Call Clara for info or appointment TODAY at 856-264-1058