Minnesota First Time Home Buyers

Everything you need to know, when buying your first home

Steady Stream of Foreclosures

Recent statistics in the Minneapolis and St Paul area suggest that foreclosure notices are still being sent to homeowners at 2008 and 2009 paces.  Before a bank or mortgage holder can repossess a property they must file a foreclosure notice.  There is typically a minimum period of time they need to file this notice before they actually foreclose on the home, which is why you homeowners are not kicked out right away.

So to stare into our crystal ball and predict how many more bank-owned properties will be coming on the market in the future, we simply need to look at these number of notices and we can be fairly certain that the foreclosure rate in MN is not going down drastically anytime soon.

I would expect that in 2011 and 2012 we will still have a good numbers of REO’s hitting the market in the twin cities, but instead of being the bottom-barrel $20,000 homes in Minneapolis and St Paul, they will likely be in the surrounding suburbs and outer metro areas.

The good news for first time home buyers is that this means prices won’t be climbing steeply anytime soon, and there’s sure to be a good number of homes on the market which means you have more choices when it’s your time to buy.

First Time Home Buyer Class – Sept 23, 2010

September 23, 2010
6:30 pm	to	8:00 pm

The Home Search Triangle

When you begin searching for your first home in Minnesota, there are 3 things that will go into your search criteria.

1) Location – most important because it’s something you can’t change about the house.

2) Price – there will be limitations on what you can afford based on your income and credit.

3) Style and Features – this is the type of house you’re looking for and what’s in the house itself.

While working with dozens of first time home buyers over the past several years I have noticed that one or more of these factors change throughout the course of our home search together.  The reason for this search modification is because most new homebuyers will start looking for their first home in the best location, at their highest approved price, and with the most features possible.

Most of the time these buyers aren’t able to find their perfect home for the price they can afford, and that’s usually the one part of the equation they can’t change.  There’s no magic way to make a house more affordable or put more money in your pockets (unless you’re using one of the numerous First Time Buyer Programs in MN).  Since price flexibility isn’t realistic, we may have to change one or both of the other factors for them to find what they’re looking for.

Location is tricky–buying a home in a “bad neighborhood” usually means you can afford a really nice house with lots of upgrades and amenities.  However you may not want to live in that location, and therefore no matter how nice the house is it may not be worth your money.

Style and Features can also be complicated–you may prefer a single-family home, but could be almost as happy in a townhouse or condo.  You may want 3 bedrooms but for the next 5 years be fine with just 2.  You may think having a deck outside is a necessity, but you could get by with just a little bit of backyard space.  The fact is that there are so many possibilities for the style and features in your first home you may want to keep things as open-ended as possible while you’re looking.  That way you can see a wide variety of houses and have options to choose from when you find a good house in a good neighborhood that you can afford.

The main thing to keep in mind is to not get discourage if you don’t find your dream home right away.  Many buyers spend a couple months looking for their first house, and they all agree that the wait is worth it.

You’re better off waiting to find the right house than settling on a bad neighborhood or overpaying for a house with too many flaws.

First Time Home Buyer Class – August 19th 2010

August 19, 2010
6:30 pm	to	8:00 pm

MN Summer Real Estate Info

Well the MN State Fair is only a couple weeks away, and I have some information on the summer real estate market in the twin cities area.

This video is put together by the MPLS area association of Realtors.

There have been some interesting things happening in the housing market–namely less buyers out there than we normally see in the summer.  What that means for sellers is that they will have a tough time finding a buyer.  What that means for buyers is that they will have their choice of houses because of a continued higher-than-normal inventory and lower demand.

In a nutshell: if you’re a first time home buyer in MN you have very little competition!

100% Financing – MN First Time Buyers Only!

A new 100% financing program is being unveiled for first time home buyers next week through the Minnesota Housing and Finance Agency (MHFA). This adds to the already plentiful number of programs available in the state of MN for first time home buyers.

This program is a little bit different than others we’ve talked about before on this blog.  It is essentially a Conventional Loan (as opposed to an FHA loan) which means some of the qualifications are different for borrowers who want to take advantage of the program.

The key highlights are that buyers who are eligible for this program will not have to pay any Mortgage Insurance premiums, and there is NO DOWN PAYMENT REQUIRED.  This will save buyers hundreds of dollars on their monthly PITI payments.  While there is no down payment required, buyers must contribute at least $1,000 of their own funds to the deal towards closing costs and/or pre-paid items.

If you are looking to take advantage of this or any other first time home buyer program in MN you need to contact me.  Not all lenders have access to these programs, but our lending partners have access and know the ins-and-outs of every single one of them!  So make sure you are finding the best deal possible in order to save yourself some money.

Here is the list of requirements for this program in full:

• Must be a First Time Home Buyer
• Minimum 680 Credit Score for each borrower
• Debt-to-income ratio of less than 45%
• Contribute $1,000 of your own funds
• $83,900 or less in annual household income (1-4 people)
• Complete a Home Stretch 8-hour Class prior to closing

Here are the benefits of the program:

• 100% Financing with competitive interest rates
• No mortgage insurance needed
• Up to 3% in Seller Paid Closing Costs Possible

There are more details to obtaining your loan and qualifying for this specific program.  Please email or call to get more information and see if you can take advantage of this awesome deal!

Summer Is Winding Down

With less than a month of summer left in 2010, mn first time home buyers are starting to scramble to find their first house.  Summer usually brings more homes on the market, which means buyers have more properties to choose from.  However, this summer has been unique because of the $8,000 Federal Tax Credit that ended on April 30, 2010.  A lot of buyers who would have waited until June, July and August actually made offer back in April, in order to qualify for the tax credit.  During the first couple months of summer in Minnesota, we have seen very low sales numbers for first time home buyers because of the tax credit effect.

What that means is that while the inventory of homes is still high, the number of buyers has been low, creating a very nice buying environment for these first time homeowners.

Personally, I have been assisting 4 or 5 new home-buyers during the summer months and we have effectively had our “pick of the litter” when it comes to available homes.

So if you’re thinking about house hunting or moving in the next 3-6 months, you owe it to yourself to take a look at some properties now–because you might just find a the deal you’ve been waiting for.

Should I Buy a Flip?

You’ve probably seen plenty of TV shows about house “flipping” right? Flip This House, Flip That House, Flipping Out, Income Property, Property Ladder, etc.

It’s one thing to see the old “fix and flip” properties on TV, but what about actually buying one yourself?  Especially as a First Time Home Buyer?

The first thing you should be aware of is that in a lot of cases these properties were foreclosures or short sales, which means they typically had deferred maintenance and needed a lot of repairs.  At some point, an investor bought the property and rehabbed the home in order to re-sell it to an owner occupied buyer (usually for a profit).

There are some advantages to buying a “flipped” or “rehabbed” property as your first home.

• Property is in “Move-in Ready” Condition
• Newer Mechanicals/Repairs Completed
• Chance to live in a pre-existing neighborhood with an updated property
• Possible Historic Restoration Character in the Home

But there are also some things you need to watch out for.

• Were repairs done by licensed contractors?
• Did they cover up any serious damages with cosmetic repairs?
• Are their structural issues behind the clean and newer updates?
• Is the home “over-improved” for the neighborhood value?

A good rule of thumb is to see at least 5-10 other homes in the area before making any offers, and also compare flipped homes to ones that may not be completely up to date.  Sometimes doing the updating on your own over time can save you money, and you will get to personalize the property to your liking.

Another thing you should do is try to obtain the actual list of repairs completed by the seller/investor who is flipping the property.  This may reveal items such as prior mold, fire damage, or structural concerns that even if repaired could resurface in the future with you as the owner.  A Seller’s Property Disclosure is usually the best way to verify the work that has been done on the property, and can be obtained by having your buyer’s agent contact the listing agent for a copy.

Either way, make sure you consult with your real estate agent–especially if this is your first home purchase.

Happy House Hunting!!!

Early Summer 2010 MN Housing Market

Now that July is finally here, we can take a look at some of the early summer trends in the mn housing market for 2010.  Particularly, we are concerned with what the market conditions look like from the perspective of a first time home buyer in mn.

The Tax Credit incentive is now gone for buyers looking at homes, so the market is showings signs of decreased demand, which is due in large part to the fact that a lot of buyers who would have bought during the summer actually bought during the spring in order to qualify for the federal home buyer tax credits.

The number of homes for sale is still stable, but slightly tipped in the buyer’s favor.

This video is provided by the Minneapolis Association of REALTORs.  Click “play” to see this month’s summary of the market, and determine if this might be the time to start looking for your first home!

More Active Listings = More Choices

With the topsy-turvy MN housing market here in 2010, it’s tough to stay on top of all the numbers and market shifts that occur every week of the year.  One day, the media says “housing market begins to recover” and the next day it’s “real estate still reeling”.  So if you’re a potential home buyer and you’re thinking about buying a house, what factors in the housing market should you look at to see if it’s a good time to buy?

The first factor is the current mortgage interest rates.  You have probably heard enough about interest rates over the radio and TV, but in case you aren’t aware, mortgage interest rates are at historical lows right now.  Most of my client buying their first home are getting interest rates below 5.5% – a lot of them in 4’s. Needless to say, that’s easy money, and it’s a great incentive to lock in a fixed rate at such a low percentage point.

Another factor to look at is home prices.  I don’t have to tell you that home prices have decreased in Minneapolis and St Paul over the past 4 years quite a bit.  We all know prices are low and even though the economy has declined recently, housing affordability is at an all-time high.  As long as you have the means to get the loan and make your payments, you’ll be able to afford much more house than you could have 5 years ago.

A factor you should be aware of (and not many people think about this one) is how many active listings are for sale in the market.  Real Estate is very local, so if you’re looking in Plymouth versus Woodbury, there will be a big difference.  But by and large in the Twin Cities area there are still plenty of homes for sale, making it a buyer’s market.  The simple supply-demand ratio tells us that if supply is increased, there will usually be less demand.  What that means for you as a buyer is that as the supply rises in the market there will be more houses to choose from and less competition with other potential home buyers.

Currently in the Twin Cities are there are just over 27,000 homes for sale.  A Balanced Market is typically about 22,000 for our area, which means it is a Buyer’s Market since there are more listings for buyers to choose from.  This ultimately means the buyer has more power in the transaction and can usually get a better price for the home.

Life after the Home Buyer Tax Credit has begun, and because of that vanishing incentive, a lot of people have decided to wait on buying a home until it makes more sense for them in their personal lives and situations.  So if you’re at a point right now where you are ready to dive in, you’re going to face much less competition and have a ton of houses to choose from.  This all adds up to a great buying experience for you!

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