Tag Archives: first-time buyer

32 Tips for First-Time Buyers

A month or so ago, I was contacted by a guy named Scott Riley, at HomeBuyerNation.com. I don’t know Scott Riley, and I have never heard of his website at HomeBuyerNation.com, but he asked a unique question for a post he was writing, so I played along, expecting that I really wouldn’t hear from him again. Turns out I was wrong.

He wanted to know what was the one tip I would give every first-time home buyer.

Without a doubt, I told him the number one tip I’d give every first-time home buyer would be to take your time. That perfect house isn’t out there, so take your time to understand the process, get comfortable, and enjoy it.

The title of Scott’s post is “32 Home Buying Tips from Some of the World’s Most Popular Realtors” is misleading; I must be an outlier since I’m certainly nowhere close to “one of the best” (although there are some GREAT ones that responded to Scott’s article, include Nest Realty‘s own Jim Duncan), but I thought one thing was interested that he touched on … none of us knew what the others were saying, but a couple of things were repeated as great tips for first-time buyers that I think are important, including (1) take your time (brilliant suggestion, if I do say so myself), and (2) buy with your future in mind. The best decisions are made when you act deliberately and rationally, and when you buy not for your current situation, but what you anticipate your future situation to be. As I like to remind ALL of my buyers, “buy not just for yourself, but for your future buyer.” Sure, you love that spiral staircase that requires you to tap dance down the stairs on the tips of your toes, but are you eliminating a large part of your buyer pool when you go to sell?

You can read the full post here. Thanks for letting me participate, Scott.

How To Buy Your First Home – Part One

So you want to buy your first home?  You’ve got a good job, you’ve saved up for a downpayment, and the house band the tenants upstairs started six months ago is progressively getting worse instead of better.  Yes, it might be time to consider buying your first home.  This is part one of a four part post that covers the general steps to buying your first home, and covers things like determining what you can afford, getting a loan, finding a house and handling inspections, and more.  If you have questions not covered, email me or post in the comments below!

Getting Started

I’m biased, of course, but I think that the New River Valley is a pretty good place to consider buying your first home.  Low tax rates, good median price points and a wide mix of products (i.e. houses) makes the NRV a pretty balanced place to get started.  Buying a home isn’t for everyone, however – I know it’s sacrilege for a real estate agent to say that, but the truth is that if you’re not going to be in the home for at least three years then buying a home right now probably doesn’t make good financial sense.  There are closing costs when you buy, closing costs when you sell, and owning a home costs money in between – so if you don’t see being in the NRV for at least three years, it might make sense to rent – but we can run through your situation, if you’d like.

The very first thing I’m going to recommend someone do before contacting an agent will be to get preapproved with a local lender (here’s a good one).  I highlight both for a couple of reasons … first, a preapproval looks at not just your income and your expenses, but verifies them against your credit score sothat you know what a lender is willing to offer.  Don’t be shocked by the number, though – just because they say you’re qualified for $350000 doesn’t mean you have to spend that much.  And a local lender knows our market … out of town lenders are looking at numbers on a computer screen to determine whether or not they’ll lend money in a particular market.  In an area like ours, where the patterns of Virginia Tech and Radford University dictate so much of the real estate traffic, having a lender who knows the trends can make things much easier when it comes time to fund the loan.

I’m Approved! Now What?

So the lender has given you a preapproval letter and said that, based on your credit report, you’re pre-approved for a loan of some amount.  Notice they say that the final approval is subject to things like another credit report, W-2s, and more, but for now the pre-approval is good.  From here, we know what you can get a loan for, what you’re comfortable actually paying for, and we can go shopping!

Well, first you need to find a real estate agent who’s full-time, who knows the Blacksburg/Christiansburg/Radford area, and who you’re comfortable working with … there, that’s out of the way. (yes, that was in fact a shameless, unapologetic plug)

Once your pre-approval is done and you’ve selected your real estate agent, it’s time to sit down and look at what’s on the market.  The New River Valley real estate market is relatively small – we sell a little more than 2000 homes every year, but it’s still next to impossible to see every single home that’s on the market.  In one Christiansburg neighborhood alone there are more than 60 homes for sale … only with a lot of time, the memory of an elephant and nothing else coming on the market could you see all of them!  And in truth, searching for 3 bedroom, 2 bath homes in Blacksburg under $250000 is going to get you a lot of options, and so we need to spend some time really working through what the important items are for your home search.  Are hardwood floors a must-have, or nice-to-have?  Should we leave out oil heat, or add in Cape Cods?  Want a place that has a fireman’s pole?  (That’s not a searchable criteria, but it’d still be a cool feature!)  Anyway, weeding through things and determining what criteria to use when searching for homes is an important next step, and will ultimately make choosing the right home much easier.

To Recap

In order to buy your first home, you need to start laying a solid foundation.  Get preapproved through a local lender, work with an agent who’s full-time and who knows their market, and spend some time working through the myriad of search options available to a home buyer.  I promise, you’ll be on better footing for it in the end.

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Part Two will cover the process of actually making an offer on a property.  You can also check out Timetable to purchasing a home, as well as What To Expect At Settlement.

Four Reasons To Consider Buying Your First Home

Why should I look into buying my first home?  Let me give you 4 quick reasons:

  1. Increase net worth – In a comparison of renters versus homeowners, the Federal Reserve Board of Consumer Finance found that the average net worth of renters was $4,000, while that of homeowners was $184,400.  A home plays a huge part in your financial future.
  2. Tax deduction – One of the largest tax deductions available is the amount of interest paid on a mortgage.  On a $150,000 loan, at a 5.5% interest rate, you can write off as much as $8,000 as deductions.  Consult your tax adviser to determine your status.
  3. Long-term Appreciation – Over the last few years, home prices have corrected and become more affordable.  While that is good news for buyers, it has overshadowed the long-term appreciation on a home’s value.  From 1950-2002, US home prices appreciated at an annual growth rate of 4.8%.  If you only use a 3% appreciation rate on a home purchased today at $150,000, that home will be worth $364,000 in 30 years.
  4. The government is handing out $8,000 to first-time buyers if they purchase a home and keep it for 3 years.

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Brandon is a branch partner at Alcova Mortgage. He enjoys doing his taxes, firewalking and competitive eating, but not necessarily in that order. You can reach him at brandon@alcovamortgage.com, or 877-552-7150.

First-Time Buyer in Pulaski VA? There’s $1 million Available For You

That’s right, $1 million has been set aside to help first-time buyers ease into the Pulaski VA real estate market.  From WSLS.com:

The Virginia Housing Development Authority has set aside $1 million for the town of Pulaski for a reduced interest rate housing program.

Home buyers who qualify for the loan will receive a one half percent reduction in the standard VHDA interest rate.

To qualify, households must have an income between $34,500 and $46,000.

“A lot of people are looking for housing already and this just gives them a chance to get a reduced interest rate,“ said Pulaski Town Manager John Hawley.

As part of the program, the town will pay for the home inspection and waive any building permit fees.

Here’s a look at the complete news release from the town of Pulaski:

The Virginia Housing Development Authority (VHDA) recently notified the Town of Pulaski that it has been selected to receive a set-aside (reservation of funds) for the SPARC program (Sponsoring Partnerships and Revitalizing Communities).  These funds will be available until June 30, 2010.

The SPARC loan is a program that reserves funds for localities and organizations to promote affordable housing to first-time home buyers.  Homebuyers who qualify for a SPARC loan receive ½% (one half percent) reduction in the standard VHDA interest rate for first-time homebuyers.  The Town of Pulaski for Round 8 currently has $1,000,000 (one million dollars) reserved by VHDA at the ½% reduction.  A citizen who is interested in buying or building a home in the Town of Pulaski may want to consider applying for a SPARC loan through one of the VHDA approved lenders.

The Town has targeted households with an income between $34,500 and $46,000 to receive the ½% reduction in their mortgage.  As part of the program, the Town will cover the cost of the required home inspection and waive any building permit fees. Connection fees for new construction will be waived.  Houses may be purchased or built up to $225,100.

If someone is interested in this opportunity, they should work with an approved VHDA lender.  The following three have agreed to work with the Town or you may check with your lender:  Suntrust Mortgage, Bank of America and Stellar One; or contact the Town of Pulaski Managers Office at 994-8600.

So what would $225100 get you in the Town of Pulaski?  A lot.  There are currently 74 homes on the market in the Town in that price range, and the median list price is $119500.  If you qualified, with a 1/2% interest rate reduction, a home inspection paid for, and an $8000 first-time buyer tax credit from the federal government, there’s a lot of money to be saved.  Let me know if you’d like more details.

Will They? Won’t They? The White House Offers Little on the First-Time Buyer Credit

The tax credit seems to be all the rage in the real estate world these days, and for good reason … it’s going to expire.  See that ticker on the right side of your screen (if you’re on a mobile phone, apologies – you’ll just have to imagine it) – that ticker is counting down to the expiration date of the first-time buyer credit on November 30th.  Any home buyer, who hasn’t owned a home in the last three years and who close on or before November 30th, is eligible for up to $8000 in tax credits.  Anyone who closes AFTER November 30th gets … zero … nothing.

Unless the tax credit is extended, which is possible … or not.  No one really knows.  Earlier this month, the White House Press Secretary Robert Gibbs talked a little about the credit, but gave no real specifics on what the White House hoped would happen to the credit.  He did insinuate that the tax credit had been a positive thing for the economy, but backtracked on suggesting that it would be extended.  Here is the full text of that briefing, from Time, as well as a couple of excerpts (my emphases added):

Q On the additional measures — you know, the COBRA, the extending unemployment tax, the home buyer — which one do you think has been most effective in terms of stimulus and creating jobs?

MR. GIBBS: Hans, I’m not an economist. Obviously, I think in terms of — as I said to Athena, I think when you’ve lost your job, making sure that you have health care is tremendously important. I think if you’ve lost your job having extended and enhanced unemployment benefits are tremendously important. Obviously, there has been quite a bit of success in the first-time homebuyer’s tax credit. And I think overall, the recovery plan has had a great and positive impact on our economy.

and then

Q But the homebuyer tax credit in the first stimulus package, you guys extending it outside of the — it wouldn’t be a second stimulus?

MR. GIBBS: Again, decisions on this haven’t been made. I just was simply talking about what people had been discussing with Congress, and programs that are soon going to meet legislative deadlines.

So what will happen?  Who knows.  I think (which means nothing other than the synapses in that goo up there started firing a little) that it’ll be extended, but then I’ve never had a lucky streak in Vegas either so don’t bet on me.  In the grand scheme of things, though, the administration wants good vibes continuing into 2010, and a boost to the housing stock would help that.  There are many that argue extending the tax credit is the wrong thing to do, and an article in today’s Wall Street Journal states the cost per credit to be as much as $43000 each time:

Ted Gayer, a scholar at the liberal Brookings Institution, argued in a recent paper that the credit costs the government about $43,000 for each additional home sale it produces. That is because most of the two million or so home buyers expected to claim the credit would have bought a house anyway. Only about 350,000 were additional buyers. Expanding the credit to make all home buyers potentially eligible would swell the government’s cost per additional home sale to more than $250,000, said Mr. Gayer, co-director of economic studies at Brookings.

Economists at the National Association of Realtors said they don’t disagree with Mr. Gayer’s analysis of the existing credit’s cost to the government. But they said he plays down the impact the program is having in supporting home prices and related expenditures.

Personally, I want the credit to be extended because it brought people into the market.  Did it bring 350000 additional buyers into the market?  Who really knows?  I can say with certainty that I had the pleasure of working with several buyers who would not have purchased in 2009 had the $8000 tax credit not been available to them, and another closes later this month (no more grocery runs up three flights of stairs, John!).

What are your thoughts?  Tax credit good?  Bad?  Don’t leave me hanging, someone chime in!

Brandon Nicely Loves Hair Bands – and Buyer Credits

Everyone probably remembers the hit song from Bon Jovi:  “ITS MY LIFE……….ITS NOW OR NEVER!!!!”

This song says it all about the first time homebuyer advantages that are still available.  Here are the specifics:

If you have not purchased a property in the last 3 years and buy something before November 30th you qualify for an $8k tax credit.   This is not a tax deduction but an actual $8k cash check rewarded to you for buying a home.

That’s it!  It’s easy, here’s the formula … Lowest prices in many years + $8k cash tax credit + historic low interest rates = best time to buy.  If you have waited it out now is the time to jump in.  A normal loan process takes about 30 days from the time you sign a contract, which means you would need to find a house this month and make an offer to make the tax credit deadline.

A lot of you may be wondering, “Well I have not saved up 20% down payment and I don’t know if I would qualify right now.”  Don’t wait, call me today as there is no charge for a consultation and there are still actual 100% loans available.

If you make less than $75k chances are you would qualify for a 100% loan with an interest rate below 6%.  If you make more than $75k chances are you only need 3.5% down to purchase your first property with  a rate below 6%.

So if you are thinking about buying your first home take some wisdom from OG Mandino when he said “I will act now.  I will act now.  I will act now.”

Brandon Nicely

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Brandon is a branch partner at Alcova Mortgage.  He enjoys doing his taxes, firewalking and competitive eating, but not necessarily in that order.  You can reach him at brandon@alcovamortgage.com, or 877-552-7150.

Will The $8000 First-Time Buyer Credit Be Extended?

As we countdown to the expiration of the $8000 first-time buyer tax credit, the question everyone seems to be asking is “are we going to see the credit again?”  As I was speaking with a seller tonight, it was one of the questions he wanted to ask, and I’d bet at least once a day for the last few weeks has someone stopped me to ask whether I’ve heard that the first-time buyer tax credit will or will not be extended.

I’ve just gotten off the phone with the Obama administration, and I’m pleased to announce … that I don’t know.  A fortune teller would be just as qualified as any of the rest of us, at this point.  And I don’t mean to make light of the situation, either, it’s just that no one can say with any certainty3820338564_cc17aabffc about what’s going to happen, and so we’re just gazing into our crystal balls, waiting for the sign. But here’s what I DO know:

  • the credit has had an impact, both locally, regionally and nationally.  And buyers are reporting that they’re already seeing their credit check – one client, who closed in July, told me in August they had received their check and put in new kitchen countertops already.
  • mortgage rates are still VERY low, as lenders continue to offer incentives to buyers.  I saw a 30-year fixed rate today at 4.85%, and local lenders are offering competitive rates with low fees.
  • existing home sales rose again in July, making that the fourth straight month we’ve seen that since 2004.  This was driven in part by foreclosures being taken off the market, but that’s still inventory that’s being taken off the shelf and put back into play.

And here’s what I think will happen:

  • in my opinion, we’ll see the credit returned, in at least a revised form, and soon after the November 30th deadline.  It can’t be argued that the tax credit has had an impact – according to the IRS, that bastion of transparency, 1.4 million individuals have taken advantage of the tax credit, and somewhere I read as many as 350000 homes purchased year to date used the credit.  350000 homes, 1.4 million individual … I don’t know how the numbers add up, but there you go folks.

3475906797_3c4d28c22bSo when I look at my own crystal ball, I see a new revised – and far-reaching – credit being installed shortly after the November 30th expiration; I just don’t think that the administration will ignore the increased pace of the housing market in 2009 since the tax credit was announced.  Sure, nationally there are still pockets of problems, and I think we’ll see more to come, but housing will not lead this recovery anyway, I don’t think – it’s just one component of a much larger economic engine.  Jobs seem to be where all the attention’s being focused right now, so if I had to bet I’d say that employment will be the driver on this recovery bus.

I know that many people disagree saying that the tax credit further taxes an already exploding budget, and that it boosts sales but not the economy.  Calculated Risk is one of those, and they’ve got some uber-smart people … I see that, I really do, it’s just that we won’t know the true impact of the credit long-term for years to come, when we know whether or not people were able to hold on to their homes despite job losses and rising costs (health care, anyone?).  In the short-term, and foreseeable future, the credit looks to have pumped consumer money – not government funds – back into banks, and taken housing inventory off the market.

That’s a win, in my book.  It’s a rock and a hard place when you consider how much our government is spending on all kinds of initiatives, but improved consumer confidence in one sector will begin to improve consumer confidence in other sectors.  What do you think – have we improved the housing situation, or made it worse?

Thanks for the photos.

The Truth About The First-Time Homebuyer Credit

2944582909_ea72da6441A few weeks ago, I had the opportunity to speak with friend of the blog Sarah Cox of The Roanoke Times about the First-Time Homebuyer Tax Credit.  We wanted to clear up some of the confusion about the credit, and Sarah posted a piece in The Roanoke Times today about it (seriously, RT, can we get this section of the paper online?).  Here’s a reprint (links are mine), as well as a follow-up at the end now that even more details have changed.

“While there is no doubt the first-time buyer credit is being met with enthusiasm, there have been a few myths and misunderstandings about how it works, according to REALTOR Jeremy Hart of NRVLiving & Coldwell Banker Townside in Blacksburg.

Formally known as the American Recovery & Reinvestment Act of 2009, information about it is available through the Virginia Association of REALTORS (VAR) website (www.varealtor.com/memberservices/realtortools).

This will download a PDF one-page brochure, “What You Should Know About the First-Time Homebuyer Tax Credit.”

On his blog, Hart simplifies the information by stating that first-time homebuyers who purchase their homes within the Jan. 1 to Nov. 30 time slot are eligible to receive a tax credit of up to $8,000.

‘That tax credit can be applied to their 2009 taxes.  In the last few days, there’s been talk that the credit can be applied as a down payment at closing, and where there are all kinds of sites that right now are saying ‘Yes, you can,’ hold tight – the lenders I’ve talked to locally are saying ‘Not so fast’ … they are waiting on more details,’ he said.

There is a difference between the 2008 buying incentive and this one.

‘Last year’s was a $7,000 credit that had to be paid back over 15 years or at the sale of the home,’ explained Hart.  ‘This one doesn’t have to be paid back unless a homeowner moves sooner than three years.’

If the homebuyer moves before three years occupancy, he or she is obligated to pay back the whole amount.

Another important point is that the tax credit amount is up to $8,000.  It is equal to 10 percent of the cost of the home, and the maximum credit is $8,000.  A buyer claims the tax credit on his or her federal income tax; if the credit is greter than the total tax liability, the homeowner will receive a refund check for the balance.

And only first-time homebuyers can take advantage of this tax credit.  That is defined, said Hart, as a person who has not owned a home in the last three years.  But there is an income caveat involved.  People with adjusted gross incomes of up to $78,000, or $150,000 if filing jointly, are qualified.  Those who earn more qualify for less credit.  Those with incomes of $95,000 (jointly, this is $170,000) or above don’t qualify at all.

Hart said entering the third quarter of the year, he has seen positive effects of the tax credit.

‘It has helped stimulate certain segments,’ he said.

In mid-May, Hart said it has stimulated buyer activity.

‘Last week, three out of four first-time homebuyers were taking advantage of this; the homes ranged from $150,000 to $435,000.  They all have said that it helped them be ready to buy,’ said Hart.”

An update – the credit can now be used as a downpayment, but check with your lender before applying.

The picture has nothing to do with the post – I just liked it.