Interesting article just released from the Florida Realtor’s website… and a great read if you are a first time home buyer thinking about purchasing a home.
March 22, 2011 – Inexperienced first-time buyers may not know if the time is right to make a move into real estate.
“It’s not about timing the market. It’s about time in the market,” says Steve Berkowitz, chief executive officer at Move Inc., the online company that oversees operation of Realtor.com. “Once you know how long you expect to own a home, look at the historical value performance of properties in the neighborhood. Be confident about your own job security, downpayment resources and tolerance for upkeep, as well as the lifestyle you want today and in the near term. Today’s housing market, especially for first-time buyers, makes it almost impossible not to think about the possibilities.”
To help first-time buyers decide if they’re ready, Move created a “reality checklist.”
Get your financial house in order
Before you decide to buy a home, make sure your credit is in good shape and repair any damage previously done. Know your credit score: Thirty-five percent of successful buyers recently reported they didn’t know their credit score when they went house shopping, according to a national survey fielded for MortgageMatch.com. Having enough money set aside for a downpayment is a key component. Also, don’t put all your money in the downpayment as other fees or unexpected expenses often arise after closing.
Don’t fall in love with a house you can’t buy
Find out how much you can afford, including how much money will be required for a downpayment and closing costs. Look for special loans available from FHA and government-sponsored loans for first-time homebuyers that reduce the amount of money required to get into a home.
Learn the lingo
Since first-time buyers are new to the market and will finance a significant portion of their purchase, it’s important to get familiar with the processes and terminology associated with home buying. Here are a few key terms from MortgageMatch.com:
• Bait Rate: Misleading mortgages with low rate promises and no contingencies generally for those with extraordinary credit. Rates are based on: credit, debt-to-income and loan-to-value ratios, the size and type of loan, property location and the day you lock your rate, etc. The loan isn’t locked until the application is accepted. By then, it may be too late to find a better rate from another lender.
• Basis Point: A term used in the mortgage industry, which simply means 1/100th of 1 percent.
• Closing Costs: The fees required to process and close your loan. They’re a cash obligation running from three to five percent of the purchase price. Motivated sellers might pay a portion of these costs.
• FHA: Federal Housing Administration, the federal government agency that oversees the U.S. housing market. FHA loans are loans insured by the U.S. Department of Housing and Urban Development.
• FRM and ARM: A fixed-rate mortgage loan (FRM) is a loan where your interest rate stays the same for the life of the loan. ARMs are adjustable rate mortgages with variable interest rates that fluctuate based on an agreed-upon index.
• GFE: The Good Faith Estimate (GFE) is a document explaining all costs involved in getting a loan.
• TIL: The Federal Truth-in-Lending Form is a document that spells out the costs and fees of the loan.
• Lis Pendens: An official notice that there is a pending lawsuit over real estate.
• Per Diem Interest: Interest you pay per day, from the day you close to the last day of the month.
• Underwriting and Underwriting Fees: Underwriting is a process the lender performs to qualify a borrower for a loan, and the fee is what you pay the lender at closing to cover evaluating the risk involved with loaning you money.
• Warranty Deed: A legal document guaranteeing the seller has a right to sell a property, which is very important if you are considering a distressed or discounted property.
If now isn’t the right time, prepare for your future purchase
If now isn’t the right time to buy a home, make a plan with a target date for when you expect to be ready. Improving your credit, paying down debt, stabilizing your work history and calculating exactly how much you can afford, are the best ways to prepare for your future home purchase. It’s also important to refrain from making any new large purchases or applying for new credit.
© 2011 Florida Realtors®