Minnesota First Time Home Buyers » Top Posts

Word of The Week: FHA 203(k)

Steve Howe — Wed, 06 Jan 2010 12:36:56 +0000

When buying a distressed property like a Foreclosure or Short Sale, you may have limited options for what type of financing you can use. The main reason many homes can’t use regular FHA or Conventional financing is because the property may be without plumbing, electric, or other living essentials. These “typical” types of financing require homes to be fully livable in order to close the loan when you buy the property and take ownership.

For most first time home buyers, FHA is going to be their only option when buying a property because of the low down payment amount and the competitive interest rates.

It’s a common scenario amongst MN Buyers today that their financing will not allow them to purchase a home. So how can you work around this fixer-upper roadblock? Easy: by taking advatnage of the FHA 203(k) Rehab Loan Program.

What this program essentially does is allow a buyer to purchase a property which may have “essential living issues” such as the problems named above. They are able to close the home purchase with the seller, then begin rehab work after closing and roll the costs of the improvements into the end loan.

There are two different types of FHA 203k loans available, a streamline version and regular version. I have attached a PDF here that you can save or print with all the information you need on these loan programs. Click Below for the File:

FHA 203(k) Loan

If you’d like to see if you’re eligible for this or any other loan program, contact me.

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10 Questions to Ask Your Agent

Steve Howe — Sat, 10 Jan 2009 04:44:50 +0000

It’s important when you decide to buy a home to hire a Real Estate Agent. The benefits of hiring an agent can be found in the Realtor Article, but this post deals with some specific “interview” questions you should ask a potential agent, before you begin to work with them.

After all, Real Estate Professionals work for you - you’re the boss. So even if you don’t remember all these particular questions, ask as many things that come to mind about the home buying process. This will ensure a very pleasant home buying experience for you in the long run.

The following is a list of 10 questions you should ask, along with what I personally would respond with.

Q: Are you a Full-Time Agent or do you have other jobs on the side?
A: I am dedicated to helping home buyers as my full-time career. This allows me to be available to clients throughout the entire process, and devote my time to real estate without other distractions getting in the way. Some agents prefer to work in real estate part-time which is Ok for them, but I find that my knowledge of the business increases much more rapidly by focusing on the current market conditions, which are always a concern for new home buyers.
Q: Do you work with a Team of Professionals?
A: Absolutely. The Minnesota Real Estate Team has been around for over 5 years, and we have been the #1 Sales Team in MN for the last 3. Through that time we’ve built a great network of professionals in all aspects of real estate. Lending, Accounting, Inspections, Title, and Insurance are just some of the Preferred Partners we have in the business. This makes the experience so much easier for First Time Home Buyers.
Q: What are 3 things that separate you from other agents?
A: I’m a very honest, trustworthy, and friendly person. I also take the time to listen to your concerns and needs, so that your questions get answered right away, even if that means going to other sources to get the proper information. I am available to you and have good communication skills with clients and other professionals in the business. Lastly, I keep a good sense of humor throughout the process, because after all – buying a home should be fun too, right?!
Q: How many other clients do you work with at one time?
A: I typically only work with 10-20 buyers or sellers at any given time. I may be in contact with several dozen people who might buy or sell in the future months/years, but actively speaking, only about 10-20. Why?? It allows me to devote more time to the individual client’s needs, and helps me avoid cutting off contact to buyers. The “Super Agents” that you may have seen on bus benches and billboards are merely a business CEO. Other sub-agents do most of the hands-on work with clients. But for me, I take the time to walk you through the whole ordeal and make sure you have the chance to ask me questions along the way.
Q: Do you work with more Buyers than Sellers?
A: I work with about 80-90% Buyers as opposed to Sellers (or listings, as they are called sometimes). Concentrating on buyers helps me understand the fears and concerns you have with the home buying process. Unfortunately for some agents, they think First Time Home Buyers are a waste of their time and energy, because there is more explaining and educating to do. For me personally, I enjoy helping people become home owners and feel a sense of satisfaction when you find the right home for you. Maybe it’s a bad “Business Move” on my part, but you get to benefit from my excitement in helping first time buyers.
Q: Are you a member of the National Association of REALTORs®?
A: Yes. Not all agents are REALTORs®, and having that designation means a little something special, when compared to a regular agent. I wrote another article about the benefits of working with a REALTOR®. I am also a member of the Minnesota Association and Twin Cities Association as well. This adds another level of professionalism and trust that not all salespeople can claim, but most importantly it gives you more peace of mind that I’m working with your best interests at heart.
Q: Do you have a Buyer’s Representation Contract you need me to sign?
A: Yes, we will need to sign the agreement to make sure you are represented in the transaction. However, unlike some other agents, I don’t always like to sign the contract up front. See, most agents will ask that you sign the contract with them early on in the relationship, ensuring that you will buy a house using their services. I believe it’s a much more friendly environment to sign the agreement only when writing an offer. The house buying process is hard enough without having feelings of resentment if your agent isn’t working for you as much as you like. So, if at anytime during the house hunting ordeal you are not comfortable moving forward, then we can agree to part ways peacefully without having to sign more paperwork. In short: it’s easier for both sides. But yes, that is an important part of the process.
Q: What methods will you use to help me search for homes?
A: We will first meet in person to discuss your goals and time-frame. Some people like to start the process a year out from actually moving. Others wait to start until 2 months from buying. After that initial meeting, we will setup an MLS search for your email account, which will send you properties in your desired areas. We will also tour those homes which you feel are best fit for you. I will also keep my eyes and ears open to the market as listing inventory is always changing. After you tour a couple of homes, you’ll be more in tune to look for problem areas which I will help point out, and after we find the right home for you, we will put in an offer.
Q: How will you help me determine a fair price for my offer?
A: Before writing up the offer, we will compare other Sold homes in the neighborhood that match your desired house. This will give us a clear picture of how much money the house is worth. Along with those Comparable Solds, we will look at other listings in the area, and examine the overall market trends (Up, Down, Stable). If prices are going down further, then making a lower offer will protect you from over paying.
Q: How do you get paid? Will I be paying you directly?
A: Most agents (like me) work on a Commission Only basis, which means if you don’t buy a house, they don’t get paid. In almost all cases the Seller will pay their Broker/Agent, and they will in turn pay the Buyer’s Agent. This means you don’t have to come up with that cash, which is a nice perk of buying. Some buyer’s agents also have a minimum fee they charge on top of the regular commission structure. Payment only comes upon the successful closing of the deal, so until that point, you won’t have to worry about paying me at all. There may be some fees to other 3rd Party Professionals (Inspectors, Earnest Money, Appraisals, etc) but none to me, your agent. In other words: until you’re happy, I keep working.

If you’ve made it this far, you’ve passed the first test of being committed to learning more about the process.

Congratulations and keep going until you realize your goals of home ownership!

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7 Steps to Home Ownership

Steve Howe — Thu, 08 Jan 2009 07:40:22 +0000

I know what you want as a First Time Home Buyer. I was a Real Estate Newbie not too long ago myself, so I feel your pain.

What you want is someone to tell you the magic formula, the steps, the price tag, and all the hidden details about buying a home. Well, unfortunately there is no magic formula, no “one-size-fits-all” approach to buying a home. Everyone is different, and has different needs and goals in their pursuit of home ownership.

What I’d like to offer you is at least some very easy steps, so you will be prepared for the wonderful journey of buying your first home.

Without further adieu, here are the 7 Step to Home Ownership:

Pick a Team of Real Estate Professionals who will take the time to educate you about the buying process. You should expect to work with a Realtor and Lender who will understand your needs and listen to your goals. You can work with this Team to develop a buying strategy which allows you to meet your goals in affordability and quality of home.
Learn the Different Financing Options. There are many new mortgage programs available today than there were just a few years ago. Loans exist that can assist you with your down payment, or remodeling your new home. FHA, conventional, and other State Programs should all be examined before you commit to shopping for houses. It will help you relieve some stress that the home buying process can conjure up.
Get Pre-Approved for a Mortgage. Whether the Housing Market is Up or Down, a Seller will always accept an offer from a Buyer that is Pre-approved over any other offer. Getting Pre-approved means you will meet with a Lender and examine your credit score, while also taking into account your assets, debts, and income. This will give you the best idea of what your buying power will be when house-hunting. Buyers who go out looking for houses before completing this step are often disappointed with their ability to buy, since they’ve been shopping in a higher price range. Whatever you do, DON’T SKIP THIS STEP!
Create 2 lists: Needs vs. Wants. This is an important one also. Make a list of the things you absolutely need in your new home. Maybe it’s being in a certain School District, or having 3 Bedrooms, or all living space on one level. Whatever the criteria is, make sure you cover your needs first, and then make a second list of your wants. This will give you the foundation to work with, and also document your bonus features which may end up sealing the deal when you find a house that fits all your needs, and some of your wants.
Decide How Long You May Live in The Home. As renters, you may be used to moving every 12-24 months. But as a Home Owner, one of the advantages is that you don’t have to move after only a couple years. Some buyers sill like to move every few years, and that’s OK. But the longer you live in your home, the more equity you will gain by paying down the mortgage amount and over the years get some appreciation. 5-7 years is the National average for owning a home. Most First Time Buyers will live in their first home for a little bit less time, so it’s important to pick a house that most other people would like to live in as well. Try to think several years down the road, and consider re-sale value. Otherwise you could end up in a home which no longer meets your needs, but you’re stuck in because it is too tough to sell again at a good price.
Be Flexible and Keep it Simple. If you’re willing to work with the Seller of a home, you will be a much more attractive Buyer to do business with. Being flexible on the closing date could make a huge difference. Also, if you are willing to look past minor details of a home (paint colors, light fixtures, etc.) you will seem easier to work with. This could be the edge that you need to get a contract accepted in a Seller’s mind, if you get into a multiple offer scenario.
There is Always Another Home That Will Fit Your Needs. You may not get the first several homes you want to buy. Someone else might offer more money and you may have face the dreaded “Rejected Offer” That’s OK. Just remember that there will be more homes out there for you. Especially in such a strong Buyer’s Market, the inventory is so high that more than a handful of homes would probably make a great first property for you to buy. Don’t get too discouraged if it takes a few weeks or months to find the right one. Just be ready to act fast, and don’t get emotionally attached to the answer.

Doing some of this “homework” ahead of time will make the experience much more enjoyable. Many people say that buying a home is the biggest decision in their lives. Don’t be hasty – take your time and get as many professionals on your side to help guide you through the process. I wish you many happy years of home ownership.

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Credit Score Ratings

Steve Howe — Thu, 01 Jan 2009 08:25:38 +0000

OK, so let me begin by saying this: I am not a Mortgage Broker and do not intend to become one, so take this article at face value and always speak to a qualified lender before making any decisions.

There, now that we have that piece out of the way, I want to talk to you about credit score ratings.

Credit is really something that should be taught in schools. It’s the “heartbeat” of our economic system in the U.S. and probably the world.

We all know credit as borrowing money now, and paying it back later with interest. This is fundamentally true. However many people have no idea what really makes their credit rating “bad” or “good”. There’s a lot of companies out there profiting from simply telling you the 3 credit score rankings, but they don’t explain how to get better credit, and be able to qualify for more borrowing amount.

Here’s a tip for you: If you don’t have any credit cards, car loans, student loans, or other borrowed credit accounts – go out and get a couple today!!

Wait a minute, did I just tell you to go borrow money you don’t have??!? Absolutely not. The idea behind lending people money is that the money gets paid back. So never, ever over-extend your means. Although, people do this everyday. Hell – I have even done it in the past.

The reason I’m telling you to go out and get a credit card today is because the longer you have credit card accounts open, and have paid them off timely, the better your credit score is going to be.

See, credit is really more like

“your ability and history of paying people back for debts you’ve taken out.”

In other words, just like an employer will look at your work and education history to determine what job they should hire you for, Mortgage companies and other lending institutions will look to your credit score to find out what kind of borrower you are.

This is essential if you’re getting ready to buy your first home.

You will probably fall into one of these categories:

No or very little Credit History
Lots of Credit History, but rarely pay on time
Some Credit History, but rarely pay on time
Some Credit History, and regularly pay on time
Lots of Credit History, and regularly pay on time

The first 3 categories are not places you want to be. Lenders want you to have a track record of paying back loans, so they know you’ll continue paying back your next loan they give you.

Some people think having credit cards and loans out in their name is bad – but it’s only a bad thing if you don’t make your payments on time, or take out too many lines of credit too quickly.

In fact, banks and investors like to see a few different accounts in your name and verify that you are capable of paying back those loans in a timely fashion. Why else would they want to lend to you?

The last 2 categories from above are the best. Notice the common theme “and regularly pay on time.” That’s what they’re looking for.

So I suggest taking out one or two credit cards and only charging a tank of gas once a month on the card, and pay it back before interest is charged to you. That way you’ll only be making about $30-50 in payments, and it’s money you probably have in your checking or savings account already.

Resist the temptation to make big purchases just because you have a few thousand dollars in credit available to you. Lenders also look at your debt-to-limit ratios to see if you’re maxing out multiple cards. Keep your running balance low in comparison to your limit, and watch your credit score rise with ease.

There are other ways to establish better credit scores, but most importantly there are a million different ways to make your credit rating plummet. These are pretty obvious to most people, so remember that there is no substitution for simply paying your loans back quickly. It says to potential lenders “I’m safe, give me money.”

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3 Secrets to Buying a Home: What The Experts Don’t Tell You

Steve Howe — Tue, 23 Dec 2008 01:05:53 +0000

OK, I know what your thinking: if I’m a “First Time Home Buyer Specialist” then wouldn’t I be considered an “expert”? Well, yeah I guess. But nonetheless, I’m going to give you some secret advice I tell my clients when we are making an offer, and getting ready for closing.

1. Ask for Seller Paid Closing Costs. Most people know what closing costs are. They’re the payments you have to come up with to obtain the loan, do a title search, and cover the cost of getting the deed. There are a lot of random fees usually in the HUD statement which buyers have to pay for, but what a lot of sellers are doing in today’s market is paying a portion or all of these closing costs for the buyer, in order to get the house sold.

Since we’re in a “Buyer’s Market”, it’s harder for sellers to compete with one another when selling. So we are seeing more and more buyers ask for closing cost contributions to help cover the acquisition fees.

In some agents’ minds, this can deter the seller from accepting an offer. But in truth, the average time on market in MN is still around 6-10 months for single family homes.

If you submit an offer and want to save a few bucks, make sure you ask your Realtor about some “Seller Paid Contributions”.

2. Set The Closing Date Near The End of The Month. Why would this matter? It’s simple, really. On most real estate purchase agreements, there is a section that lays out the property tax payments, and who will pay for these taxes upon the transfer of the deed.

While every deal is different, it’s very common practice to have the property taxes be prorated from the day of closing, so that each party, the buyer and seller, are only paying for the days in which they have ownership of the property. If you’ve ever started a rental lease in the middle of a month, you’re probably familiar with this practice of proration.

On top of that, however, there’s another financial perk to a late-month closing date. When you go the closing table, you will be paying the interest for your loan, for the remainder of the month in which you close. So if you’re closing December 30, you only have to pay 1 day’s worth of interest up front at the closing table (note: the seller is responsible for the day of closing).

What this means, is that the later in the month you close, the less you’ll have pay up front. And, your first mortgage payment won’t be the 1st day of the next month, but rather the 1st day of the second month. So in our Dec. 30th example, your first mortgage payment isn’t due until Feb. 1st. Essentially you get to live first, and pay second. It’s the total opposite of most rental agreements, where you have to pay on the 1st of the month in order to live there for that month.

3. Setup Your Utilities Before Closing. This is not a very important point for the actual sale of the house. But if you’ve ever tried to get the cable company to hook up your new service, you know it can take a week or two for them to schedule an appointment.

While the closing documents are being assembled, I also gather the utility information for my clients so they don’t get moved in and find out there’s no water or garbage service yet. Remember to contact your local companies and let them know the date you’ll be taking over ownership for the house. Include things such as

Water
Garbage
Recycling
Electricity
Natural Gas
Cable TV
Phone Land Lines
Internet

Also don’t forget to transfer your address at the post office and get your mail forwarded to the new place. Call your credit card companies, banks, car insurance, and other services that may have your address in their database. It will save you a ton of headaches and frustrations by taking care of this before moving in. That way you can start decorating and getting comfortable in your new house, rather than worrying about having no heat or lights.

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8 Mistakes Most First Time Home Buyers Make

Steve Howe — Sun, 21 Dec 2008 18:04:00 +0000

Avoid these pitfalls and you will save time and money with your first home purchase!

Using a Lender who doesn’t specialize in Special First Time Home Buyer Programs. Our partners, Cornerstone Mortgage, take pride in being educated and having access to exclusive loans and credit packages in the State of Minnesota. Only a handful of mortgage brokers have these programs available to them, including the CASA and MHFA programs. With a team effort, we will find the best financing for you individual scenario and make sure you can afford the monthly payments on your loan.
Looking at Home before you get pre-qualified. So many Minnesota First Time buyers make this mistake. They think the first step to buying a home is to look at homes in their neighborhood, and then see how much they can afford. This is completely counter-productive. The first step should always be finding out what your buying power will be – especially in a tighter lending market. Think of it this way: would you go the grocery store to buy a full cart of items before checking how much cash you had in your wallet? If not, then you shouldn’t start looking at homes seriously until you’ve met with a lender and Realtor.
Looking at homes above your Price Range. I’ve seen this one a lot lately. Many buyers think that they can buy 10-20% more house then they are able to, or that these homes will come down into their price range so they can purchase them. While home prices have fallen the past few years, it would be a waste of your time and emotions to fall in live with a house that’s $50,000 more than you can afford. You’ll get caught up in the moment and forget that while a 5 bed, 3 bath house would be very nice to live in, your price range and needs are really only for a 3 bed, 1 bath home. Don’t live in a fantasy world – stick to your price range and you won’t end up buying a home that could financially eat you alive in a few years.
Not making a Monthly Budget of expenses and bills before taking on a Mortgage. Write down all your monthly bills: Car payments, Phone Bills, Insurance, Student Loans, Credit Cards, Cable Bill, and any other monthly expenses you take on including all utilities. Remember that if you are coming from renting an apartment, your heating, cooling, and electric bills will most likely increase with a bigger home. This is an area I see a lot buyers get in over their heads. Even if you don’t write down your monthly bills and expenses every 30 days, at least write them down while you’re considering making a home purchase, it can give you a good sense of where your money is going, and help you gauge how much of a mortgage payment you can realistically afford.
Wishing you have a good Credit Score instead of actually finding out. When you apply for a pre-qualification with our lender, they will review your credit report, and may find some items that should not be on there, or haven’t been cleared from your prior history. If you’re looking to buy a home quickly, within a few months, this may prevent you from getting a loan right away. Make sure you leave about 6 months ahead of time to review your credit, and wipe any blemishes off your record to ensure the best interest rate and terms for your new loan.
Buying a home for Emotional Value, and not considering Resale Value. Make sure you buy a home that will be easy to resell in the future. Even if you think you’ll be living there for 20 or 30 years, this is still a very important point. What does this mean? Don’t buy a home that is the biggest house on the block, or has features that do not conform to the rest of the neighborhood and community. You want to make sure it’s a standard house in the neighborhood because the more odd-ball features it has, the harder it will be to find a buyer in the future. Think how appealing it will be for as many potential buyers, and you’ll be set.
Making other big purchases right before you buy your house. Don’t go out and buy a new car 3 months before getting a mortgage. Don’t open up 2 new credit cards within a 6-month period leading up to your home purchase. DO take some time to pay down any large balances on your credit cards and loans so that you will have a better credit rating. If you open up new lines of credit directly before you try to obtain a mortgage, lenders will see this as risky. You may be over extending your credit and it could drop your credit score to a point that would end up costing you hundreds of dollars a month. Wait to make any big purchases until after you move in and have made a couple house payments.
Spending every penny you have on the Down Payment and Closing Costs. Leave some money in your checking or savings account for repairs, moving expenses, and maintenance costs in your house. Even if you’re buying a new property and think that nothing will break down on you within the first couple months, you’ll want to have some cash reserves in case something unforeseen happens. Simple fix ups like painting, adding light fixtures, or furnishings to the living room can add up quickly. Make sure you have enough money to pay for the acquisition of the house, and also be able to live comfortably in the home.

If you can avoid these Mistakes you’ll be a much happier and wealthier home owner.

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5 Reasons To Buy Your First Home – NOW!

Steve Howe — Tue, 16 Dec 2008 22:37:07 +0000

These are the Top 5 Reasons to buy a home in Minnesota at this time:

Prices have come down from all-time highs in 2005-2006. Almost every market in the country has declined in the past few years, and although prices may fall further still, we’ll never know until they’ve started coming back up. Factoring in prices and income rates, now is the most affordable time to buy a home since the 1960′s.
Interest Rates are still near record lows. Back in the 1980′s interest rates were around 15%. YES, 15%! Looking at a 6, 7, or even 8% fixed interest rate may seem like a lot to some of us younger buyers, but compared to rates of old, this may be as low as they go EVER.
Foreclosures are running rampant right now. It’s no news to you that tons of houses have been retaken by banks since the loans people were in had higher adjustable rates. Buying a foreclosure in Minnesota can be done very easily and with less hassle than you think. 75% of the First Time Home Buyers I’ve worked with this year have bought bank-owned homes. These are usually the cheapest homes on the block, and if you have a little extra cash or can fix a few things yourself, you can gain a lot of equity within the first year or two after buying.
Appreciation is a sure thing. For everyone that says “the sky is falling”, in a few years they’ll be exclaiming “we’re back on top!” so don’t listen to the media or the masses. We’ve come down the past several years, and that was probably foreseeable for all the action we had in 2000-2005. But over 60 years, the annual average appreciation rate in Minnesota is about 5-6%. If you buy now and hold your house for 5-10 years, you will come out ahead.
Rents are going up, due to a lot of people getting foreclosed on. There is usually a time period of 2-4 years after a foreclosure on your credit report, in which you won’t be able to obtain a loan. Since so many people have gone into foreclosure, they cannot buy for a few years. So where do they live?? Apartments and Homes for rent. Landlords and Investors know this fact, and are increasing rental rates accordingly. If you can afford your rent right now and don’t have any big blemishes on your credit history, you’ll be better off owning your home. Besides, at the end of your rental period what do you get? Nothing. Owning has it’s perks, so get educated and see if buying your first home is a good choice in this buyer’s market.

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Minnesota First Time Home Buyers » Top Posts

Word of The Week: FHA 203(k)

FHA 203(k) Loan

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10 Questions to Ask Your Agent

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7 Steps to Home Ownership

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Credit Score Ratings

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3 Secrets to Buying a Home: What The Experts Don’t Tell You

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8 Mistakes Most First Time Home Buyers Make

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5 Reasons To Buy Your First Home – NOW!

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