Tag Archives: down payment

First Time Home Buyer = Investor

First time investor? What does that mean? Simply stated first time homebuyers are recognizing the opportunity right now to come out of the rental cycle and buy. OK, so they are buying their first home, not to rent but to live in, that makes them investors.

Wise investors.

Buying a home is an investment in your future. When you rent, the only one who benefits it the landlord. Renters pay rent and might as well be flushing the check down the tubes, they will never see a return on that money beyond the end of the month.

Homeowners reap benefits in more ways than one;

  • At tax time they get a refund on the mortgage interest they paid
  • At time of sale they get to keep the appreciation on the property value
  • Homeowners have a steady place to call home, they develop roots in the community
  • Homeowners don’t have to move just because the landlord changes plans

What does it take for a renter to become a homeowner?

The question is, can a renter actually “afford” to buy a home. There are a few factors to consider when approaching the decision to buy.

  1. Credit ~ in today’s finance world the most important thing to have is good credit. The better the credit the less of a risk the lender takes, so the interest rate is better.
  2. Income ~ steady income with job stability or a track record of 3 years is needed to obtain a loan. Of course if the first time buyer is paying all cash, this doesn’t apply.
  3. Future plans ~ if the renter knows or has reason to believe there is a job transfer in the near future, buying a home may not be the best thing to do. Unless the home owner is willing and able to rent the home out in case of a job transfer. Usually the rule of thumb is 3 years are needed to stay in the home before having to sell it. After 3 years, the home buyer is usually safe.
  4. Down payment ~ most loans require at least 3% down to obtain a loan. Of course there are a few programs out there that will assist with a down payment, i.e. CHFA. However even with CHFA the borrower is expected to come up with at least $1000 of his own funds. Buyers with relatives who are willing to “gift” the down payment money can also obtain a loan.

Picking a Loan

When picking a loan it is important to consider all the alternatives. Some ads on the radio advertise, “no brainer, no closing costs, etc.” loans. The reality is the cost of money is the cost of money. Borrowers will never get something for free. Those radio ads aren’t paid for by people who aren’t making a profit. Profits on making loans come packaged in a variety of ways. The home buyer walking in off the street can easily get thrown in front of a bus if they aren’t careful.

Choose a lender who will consider your circumstances and offer you sustainable choices. By sustainable I mean a loan that isn’t going to EAT YOU ALIVE. You need to stay within YOUR comfort zone, not someone else’s!

How Much is a Mortgage Payment on a House?

If you can afford $1200, you can purchase a home priced around $175,000. You can expect to put 5% down and have a fixed interest rate of 6%. This payment would allow for annual taxes of $1800 to be included in that payment. Additionally you would need to add the cost of your hazard insurance and HOA fees (if applicable).

If you can afford a higher payment, just add $6.00 per thousand to get an idea of how much more you can afford. Say you can pay $1300, divide the extra $100 by $6 = 16.67. So that means for an extra $100(a month) you can purchase approximately a $175,000+16.67=$191,670 home.

Can a Renter Afford to Buy?

The question really becomes, “Can a renter afford NOT to buy?” The Denver real estate market is prime for purchasers RIGHT NOW. Interest rates are low, inventory is diminishing and sellers are anxious to sell. The timing is really perfect for the first time home buyer. Even buyers who do not have a huge downpayment can use First Time Buyer Programs (i.e. CHFA) to make their first in investment.

Are you a first time buyer or know someone who is? Consider your options before this markets passes you by. Call me today for a free, no obligation consultation. We can discuss your situation and offer some good sound advice.

I welcome your call.

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If I Were a First Time Home Buyer

If there ever was a perfect climate for a first time buyer to purchase a home, it is now. Why is that? Because there are bargains in both home prices and available financing terms! A combination like this allows a first time buyer to obtain more of a home for their money at less of a price.

Let’s take a look at home values. The Metro Denver real estate market has many neighborhoods offering great values in homes. Some homes are foreclosures or short sales and others are being offered by the owner. It’s very reasonable to expect to get a newer home priced in the low to mid $200′s. A few years ago that was not possible.

Your Pot of Gold at the End of the Rainbow

Your Pot of Gold at the End of the Rainbow

Just recently Uncle Sam offered to lend first time home buyers their down payment for homes up to $250,000 using a tax credit. This means the buyer must initially come up with the down payment, but will be able to deduct it from income taxes.

If the buyer doesn’t actually have the down payment, but has a relative willing to lend them the money, FHA will allow a 2nd lien to be attached to the property. This would allow the buyer to borrow the money from the relative and pay it back within a year.

There are additional rules, the tax credit is for the lesser of 10% of the purchase price or $7,500. It has a 15 year recapture rate. The income restrictions allow the first borrower to earn no more than $75,000 a year. For joint buyers they can make up to $150,000 combined.

This scenario works best with a home purchase of $250,000 or less.

Some buyers don’t have wealthy or helpful relatives but they don’t need to feel left out. The Colorado Housing Finance Authority also known as CHFA can step in and lend a hand.

CHFA makes loans to buyers who do not own any other property. The best thing about CHFA’s loans is the low downpayment. Qualified buyers can get into a home with only $1000 of their own money. Their interest rates are competitive and sometimes slightly higher, but they are the only institution that will allow a buyer to create a mortgage with so little down.

CHFA does have income guidelines, but they are quite generous. The maximum loan amount is $417,000. The biggest catch is the borrow(s) must attend a Home Buyer Education Class BEFORE executing a contract! The Home Buyer Education Classes offered are free and can be taken onsite or online.

If I were a first time home buyer, I’d…

make an effort to investigate my home ownership options. There may never be a time better than the present moment to become a homeowner!

If you would like to discuss your options, please call me. I welcome your call, with no obligation, no high pressure sales pitch. Just information the information you need to know to make a decision. The choice is yours, what would you like to do?

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