First Stop 4 Home Loans

Are you a first time buyer just waiting to get a home?  Are you trying to save, but finding it tough to do with all your other obligations?  MN Housing has come to the rescue!  Starting around August 16th, with a signed purchase agreement, you’ll be able to obtain 100% financing on a conventional loan.  This just may make it easier to get a loan on some of those homes not allowing FHA financing.

Thankfully, MN Housing realized there was a huge need to bring this back to the first time buyer.  Currently, the most minimum down payment you can do is an FHA loan — 3.5% down.  Conventional financing does allow for 3% down, but the private mortgage insurance is higher.  Due to this, and the fact that MN Housing offers a lower rate on FHA, the payment is lower than a conventional MN Housing loan. 

Now, we finally have a conventional alternative where the payment IS less than FHA!!!  Here are the parameters to the program:

• NO down payment
• NO monthly mortgage insurance
• Must be first time homebuyer
• Maximum household income 1-4 person $83,900
• One unit home, townhome or condo
• Minimum credit score 680
• Seller can pay up to 3% of the sale price toward your closing costs or pre-paids
• Minimum investment of YOUR money — $1000
• Must attend the Homestretch class

Let’s look at an example comparing FHA to this new program.

In the scenario above, you could actually increase your purchasing power by about $4000, which may not seem like a lot, but could get you up to a different price point.  This program has so many positives.  Let’s hope it can help you afford the home you’ve been wanting to buy!

With rates falling, a few of the first time buyer programs have been lagging behind as they still have higher rates.  A regular FHA fixed rate is between 4.5% and 4.75%* today.  The Dakota County program’s rate was at 4.99%.  Many people are still taking advantage of the program since it offers down payment assistance.  Recently, they lowered the rate to 4.75% to be competitive with the market.  So you know, this is a rare thing for first time progams.  Normally when there is money alloted to the counties, the initiative is set at a certain amount of funds and a certain rate.  This is great news!

To repeat, many people are taking advantage of this program not just for the rate, but the opportunity to get down payment assistance.  The Dakota County program offers three tiers of assistance depending on household income.  Household income is defined as income brought in by all people in the home over age 18 and includes such income as bank interest, child support/alimony, side jobs, etc.  Even if the income can’t be used for qualifying (i.e. overtime that has been received for less than two years), it is still figured into the limits for first time buyer programs.  Here are the down-payment tiers:

Household          10%                         5%                      2.5%
Size                  Income Limit      Income Limit    Income Limit

1                           $29,400                $45,100              $84,000
2                           $33,600                $51,550              $84,000
3                           $37,800                $58,000             $92,400
4                           $42,000                $64,400             $92,400
5                           $45,400                $69,600             $92,400
6                           $48,750                $74,750            $92,400
7                          $52,100                 $79,900            $92,400
8                           $55,450                 $85,050           $92,400

Max assistance for the 10% limit is $10,000 and max for the 5% limit is $7500.

So what do the numbers mean? Let’s reference the middle column. Let’s say you have 3 people in your household. That means your total household income must be under $58,000 — one cent over and you go to the next column. In this scenario, you qualify for down payment assistance equal to 5% of the base loan amount, with a max of $7500. The first time buyer assistance is a second mortgage that is placed against your home when you close. It is an interest-free and payment-free loan. If you received $7500, you would pay back $7500 either when you refinance your loan or sell your home.

If you’re looking in Dakota County for your first home, definitely check out this program.  All lenders are not created equally with first time programs.  Lenders must be approved to do this financing.  Obviously, I can help!  It’s time to take advantage of all you have to gain as a first time buyer in this market!

*Rates are subject to change.

Oh no, the tax credit is gone!  Why would I want to buy a home?  A fantastic question that we will answer in this educational evening about buying your first home.  Please join Steve Howe, Realtor MN Real Estate Team, and me, on Thursday May 20th to learn the steps involved in purchasing a home.  The seminar goes from 6:30-7:30 pm and is located at the Cornerstone Mortgage office at 436 Gateway Blvd in Burnsville.  

Our agenda is simple — to educate.  Would we love to be your Realtor and loan officer … of course.  Do we make you feel like you HAVE to use us — no.  This isn’t a high-pressure seminar.  It’s a relaxed atmosphere where we hope you will learn a lot, get your questions answered and be able to make good choices moving forward in this process.

We will talk about the process in the order you’ll go through it, starting with pre-approval and ending with getting the keys to your home.  We will also discuss the available first time buyer programs and the many reasons why it is still the BEST time to buy, even without a tax incentive.

If you’re interested, please RSVP to clavey@houseloan.com as soon as possible.  We’d love to have you and look forward to sharing our knowledge.  Most importantly, come with questions!

You may have heard that it’s getting harder and harder to qualify for a loan.  It’s true.  Though things have lightened up a bit, some old rules have come back into play, as well as new rules are being enforced more than ever.  For the most part, I am referring to FHA financing below as they are the most lenient when it comes to qualifying for a home.  More than 95% of my clients use this loan type due to this, the lower down payment requirement and the ability to receive a gift.

These days, what do you need to know with regards to credit requirements?

• Your credit score must be 620 or higher.  The line is drawn in the sand on this one — higher requirements for conventional financing.
• You must have THREE tradelines* with at least 12 months history.**
• If you have ANY disputed accounts, we MUST manually underwriter your file, per FHA.***
• Judgments and liens must be paid in full prior to or at closing.
• With FHA, collections do NOT have to be paid off.
• With FHA, student loan payments DON’T have to be counted in the ratios for qualifying IF they are deferred and we can get proof they won’t start until at least 12 months after your first payment is due.

For the most part, these are the main things to know about credit these days.  So you know, first time buyer programs aren’t programs that allow anybody, such as people with bad credit, get a loan.  You first have to qualify for a mainstream loan, like FHA, VA or Conventional.  Once you’ve passed their muster, then we look to see what first time programs meet your situation in terms of income, household size and location.

And some tips for dealing with your credit?  If you want to buy a home, you need to watch a few things:

• Make your payments on time — period.
• Bring your credit card balances down to 50% or less of the available credit.
• Don’t apply for new credit or have your credit pulled.
• Don’t consolidate credit cards.
• Definitely don’t close accounts, whether you use them or not.
• Don’t pay off collection accounts unless your loan officer advises you to (if you pay off an old account, it could negatively affect your score)

Certainly, if you have any questions, don’t hesitate to contact me.  It’s best to talk about what you want to do with your credit PRIOR to doing it.  Easier to “fix” a potential problem before it happens.  Once it’s done, it’s done.

*Tradeline is an item of credit on your credit report.  It can be a credit card, house payment, car payment, student loan or another type of installment debt.  Collections and derogatory credit don’t qualify as a tradeline.

**Some first time buyer programs defer to FHA standard rules and don’t require the 3 tradeline minimum or 12 month history.  Check with a first time buyer expert (like myself ) to see what you can do if you don’t meet these parameters.

***Most loans are run through an automated system to get an answer and all still get seen by an underwriter for final approval.  However, if there is a disputed account, the automated system isn’t acceptable and an underwriter MUST look at the file and stick to standard FHA guidelines.

Are you buying your first home?  How has your experience been so far — with the realtor, loan officer, even the listing side?  What have you heard about the home buying process?  Is there just one house out there for you or could there be more?  Good questions to ask yourself as you go through this unknown and possibly long process.

I can tell you that everyone’s experience is different.  That’s just the nature of the beast.  But, because this is such a personal decision, you really want to  make sure you’re working with people you can trust and actually like.  I know this may sound silly.  I have known people to buy big ticket items, including houses and not like who they worked with.  Gosh, I hate to say it, but I fell into this category once. 

About 9 years ago, I went to buy/lease a car at Lexus.  Now, I drive a mini-van — nature of the “mom” beast!!  Anyway, we only have 2 options in the MN area for Lexus — I chose the closest one to test-drive on December 31st for their “December to Remember” event– so I was under the gun to BUY before January 2nd.  I test drove a car with a salesperson who I am happy to say is no longer there.  I found the car I really wanted, but needed to negotiate the buyout of my other car — I got an estimate from them, lower than what I KNEW I could get.  I was determined I was going to buy a car THAT DAY, so I brought my husband for his seal of approval.  I had the price of the new vehicle just where I wanted it — now for my trade.  A heated discussion ensued between my husband and the used car sales manager about HOW they determined the price — Kelly or NADA.  Oh, what a night of poor behavior on both parties, even me for not standing up to the rude behavior.  To end it all, the salesperson yelled us out the door saying he never wanted to see him in the dealership again — real professional!

My husband was walking … but I wanted the car.  Being a person of great determination and getting my way, I actually went back to the dealership on January 2 and bought the car.  Yes, I bought the car.  I was blinded by my desire to have THAT car, that it didn’t matter how they treated my husband or us.  Looking back, I am ashamed I let something cloud my judgment and my ethical standards.  To this day, that whole deal frustrates me.  I know how people in sales and the service industry should behave.  Though the customer isn’t always right, they deserve to be treated with decency, care and the utmost respect.  We were NOT respected and I still went through with the deal.

Okay, so where am I going with this?  A car purchase is NOTHING in relation to purchasing a home — a VERY big financial decision.  It makes ALL the difference in the world to not only like who you work with, but who you trust.  As first time home buyers, many Realtors and loan officers don’t “have the time of day” to help you.  Maybe your price point is too low or your knowledge is less than a previous home-owner that they don’t want to INVEST in something that may not reap financial rewards.  I know loan officers AND Realtors that have this mindset.  I do NOT do business with those Realtors.  I want someone who shares my similar values and philosophy — doesn’t matter what price, loan amount or what type of knowledge you have.  It is my responsibility to serve you, to educate you and make sure you are comfortable with the process — a process that can be scary and can be blinding by the new “shiny” house.

So what does love have to do with it?  EVERYTHING!  You don’t have to “love” the people you work with, but you definitely have to enjoy and trust them.  Another point of all this — I bought a car from someone who didn’t care about me, who treated me and my husband with disrespect.  A car … how many of those cars are out there?  I had options.  I did NOT have to buy from them.  With houses, this is the same.  You may fall in love with a home that is perfect for you and your family.  It just may be, but what you need to understand is there are other homes out there.  This isn’t the ONLY home that meets your needs.  The Realtor your working with isn’t the only Realtor out there that can help you.  I am aligned with so many AWESOME agents that really do their job for you.  That’s why we’re here.  Sure, we make money and sometimes not enough to cover the time invested.  BUT, it’s not always about the money — it’s about providing a service with our expertise and show you that we care, that we love what we do and we would like you to love the experience.

There you have it.  So, if you’re in a ”bad relationship” with your Realtor or loan officer, don’t give in.  Don’t think that you can’t do any better, that you have to settle.  I’ve done that and it feels horrible.  Nine years later I remember that experience like it was yesterday.  Just think if I was LIVING in that house that someone sold me that wasn’t my best fit or the payment was really out of my range?  Now how do you think I’d feel?  LOVE the characteristics, knowledge, personality and personality of the people you invest your time with to spend the most money you have ever spent before!

As much as I’d like to say pre-approvals are all the same — they’re not.  Though you can buy the same pair of jeans at numerous stores, you cannot get the same pre-approval from numerous companies.  So why not?  If an FHA loan is an FHA loan, then I should get the same product anywhere I go, right?  Not so much.  The thing is, it’s more that all lenders aren’t created equally, meaning you won’t get the same answer or loan suggestions from everyone.  Also, many lenders don’t have access to the first time home buyer programs.  Due to this, you may very well be steered into a program that may not be right for you OR you may be steered away from those first time programs because they’re “too much work”.  Cry me a river.

The question remains, why aren’t pre-approvals the same?  A pre-approval means different things to everyone.  For instance, one lender may see the pre-approval as just running your numbers over the phone, pulling credit and then issuing you a pre-approval letter.  What’s wrong with this picture?  Isn’t this what pre-approval means?  Nope.  The reputable lenders, me included , realize there is a lot that goes into saying “you can buy a house”.  Yes, we need to run numbers and yes we need to get credit; there is still much more to do.  Your loan must be run through an automated underwriting system (AUS).  This is a program with a million different checks and balances to identify risk or maybe conclude it isn’t a risk at all.  We can run FHA, VA and Conventional loans through this system.  And, it’s HIGHLY advised.  Sometimes the program alerts us to something we missed, such as an issue in credit that’s pages down in the credit report and we missed it.  Other times, it helps us pre-approve a buyer that may not have qualified otherwise.  For instance, let’s say the normal guideline is to take 41% of your gross monthly income toward your debts and proposed house payment.  Maybe this is a bit limiting for what you’re looking for.  Looking at your credit and assets, I can determine that you are well qualified to extend yourself a bit.  (NOTE:  I am not here to increase your payment just so I can do a bigger loan.  You need to spend what you feel is comfortable.)  After I run it through AUS, I may get an approval up to 45% of your income.  This just made it so you can afford a larger loan amount and possibly the house you want.  If the payment is something you can live with, then off to the races we go.  If not, then let’s chat about where you want to be.  Ultimately, this decision should be driven by a budget — something that lays out what you owe and what expenses you have monthly in relation to your NET income (after taxes).  You know, things like clothes, dinner out with friends, a $4 cup of coffee every Monday and Friday, or whatever.  It’s crucial to budget.

Okay, so now you know we need to have the loan run through the automated system.  Now what?  We’re all human.  There is that element of imperfection — typing something wrong, from income to assets — the information is only as good as the accuracy of the data entered.  The next part of the pre-approval is gathering documentation for your loan, paperwork that supports what you supplied on the loan application.  I have had this happen before — a client told me he worked an extra 4 hours a week in overtime.  I confirmed verbally that this has been going on for the last 2 years (need a history of this type of income).  He stated that 4 hours was on the low end and sometimes it’s more.  To be safe, I used the lesser number to avoid a possible inaccurate pre-approval.  It was crazy when I finally got the paystub and low and behold, overtime didn’t really exist at all!    Either he’s not telling the truth (and I always give the benefit of the doubt) or the company isn’t paying him as they should be.  Turns out it was the latter.  Bummer, huh?  Needless to say, my income was off, so it was putting a damper on their qualifying power.  We had to adjust their searches down.  As simple as this may seem, it’s not.  I liken it to buying a TV.  Let’s say your research shows that based on your savings, you can afford a 27″ TV (do they make those anymore??).  You head over to the “big box” store and right there, first thing you see, is a beautiful, crystal clear 32″ LCD TV.  Now, I don’t know about you, but that TV is going home with me TODAY!  I’ve seen what I could have (if I could afford it) and know that’s what I want.  Looking at the piddly 27″ TVs just doesn’t cut it.  This is the same experience with buying a home.  If you’re looking at homes in a higher price range and then come to find out you don’t qualify that high because your paystubs don’t support the higher income, you’ll be disappointed.  Nothing compares to the home that was $20000 more than your new approval amount.  And the truth is, nothing will compare.  It’s tough to wean yourself off something so much nicer, bigger or what-have-you than what really works in your budget.  It’s critical that your lender gets this documentation ahead of time before you start looking.  No sense getting your hopes up for something that isn’t obtainable.

Okay, so now we know the AUS system has pre-approved your home loan and your documentation supports that — now what?  How can the pre-approval differ if the lenders are playing by the same rules?  Another great question.  First, not all lenders know what to look at with the documentation or how to even calculate your income.  Sad to say, but true.  And, not all lenders are supported in the back end to fulfill their commitments to your pre-approval.  Anyone can say you’re pre-approved; but can they actually process your loan in a timely manner, underwrite the file in-house AND fund the loan on time locally?  Not many lenders can say this.  The “big box” lenders are having a very hard time getting deals done in a 60-90 day window.  Don’t get me wrong; they can be great lenders.  It’s tough to give great customer service and attention when there are so many pieces of business coming in — too much they just can’t handle it.  Truth be told, some lenders, more specifically loan officers, just flat out lie.  Many years ago, the lending industry got an “escape” clause if you will.  Essentially, per MN Statute, the pre-approval and the full approval are NOT guaranteed since things may change.  Remember the stuff you shouldn’t do while in the home-buying process?  People do those things, such as quitting a job a few days prior to closing.  I mean really, you couldn’t wait 2 days?  It was just that bad?  He didn’t think it was an issue — we had him approved and ready to go.  Bummer is that investors are requiring a verbal verification of employment within 5 or even 3 days of closing.  We MUST call your company to make sure you still work there.  You can imagine our surprise when the answer was no.  He was stuck — closing supposed to happen in 2 days, no job, no loan.  We did the only thing we could — wait until he got the job.  Since this wasn’t my deal, I have no idea how the listing agent/seller reacted to this big delay.  My guess is they weren’t too happy.  Can you blame them?

And last, the company, and/or the loan officer, can make or break whether that pre-approval is just a piece of paper with no value.  There are a few good loan officers out there that do the right things to insure you are actually pre-approved for a home loan.  Then there are those who somehow survived all the changes and still don’t have a clue how to read a paystub, let alone ask for one.  It’s common sense.  If someone mentions that they get paid tips a huge flashing light goes off saying “Verify Income” sooner than later.  Why?  Well, tips vary and we need a 2-year history of earning them to use that type of income to qualify.  Oh and those tips that don’t make it to the W2 or tax return … can’t use them.  You will find that Realtors who have been around a long time, know and recognize those lenders and loan officers who perform with their pre-approvals.  Admittedly, I made a mistake last summer using alimony income.  I took the word of the borrower that it was consistent, month after month she was receiving it.  When I received the bank statements to confirm the stability of this income, I failed to look closely for the consistency.  When the underwriter can’t see a pattern, it’s really tough to use the income.  Holy cow did I learn my lesson by doing a loan that was completely free – no income for my company and no income for me.  But that’s what you do … stand behind your letters and do what you say you’ll do.  I put it out there and I will make it happen.  You need to find a lender that will do that — of course, I would love to be that person for you!

In a nutshell (of say 1600 words or so ), you can see that more things go into a pre-approval than just “running your numbers” on a calculator and calling it a day.  Knowing the lender you work with is so important.  The Realtors I work with are number one in the Minnesota area and realize the importance of working with someone who can perform, even if the audience did pay for the show!  Be cautious and be certain that you work with the best lenders who come through, day in and day out.  It’s not just a piece of paper that is the same no matter who you work with; it’s truly the “ticket” to whether you get on the home-buying train or have to get off right before your destination.  No fun being dropped off in the middle of nowhere with nothing to do but start the journey over — assuming you can find a ride that can get you there.  Hope to help you get there soon!

Another month, another seminar frenzy.  It’s all about you — it’s in my Vision for You and truly is part of who I am.  To me, education is key to owning your first home.  Sure, I want to help you navigate through your first financing experience on a house.  The Realtors I work with want to help you find your very first house.  Business is business, right?  Partly.  As a team, we have an alterior motive — we want you to be as prepared as possible for buying a home.  So, to this end, I dedicate three nights a month to first time buyer seminars with the help of some very awesome Realtors.

So, what’s in it for you?  My hope is that you will walk away with a greater understanding of what the process is, how to get started, what programs can help with down payment assistance and other information to understand what you’re “getting into”.  There are many people out there, maybe you included, that have a desire to own a home, but hang in the shadows due to fear, credit challenges or even stories about your friend’s bad home-buying experience.  With something so big as buying a house, you do not want to go in blindly, not to mention work with people that don’t have the market knowledge and extensive resources for assistance.   This process should be educational, stress-free and believe it or not, fun!  I get reminded quite often while talking to people refinancing that lenders and Realtors are not created equally.  Not everyone gets to experience this knowing the facts, being given options on first time buyer programs or being led through the process.  Many of my clients who weren’t first time buyers with me were slammed into the system of homeownership without a clue about the loan they were doing, consequences of certain programs, and some were even put into loans that they didn’t have to be in. 

How would you like to get a grip on your first home-buying experience?  The awesome team I surround myself with would love to help “get your education on,” with NO obligation.  We’ll discuss the process from the first step of pre-approval to the last step of closing on your home and getting the keys!  Oh, and did I mention it’s FREE*?

I have THREE seminars coming up in March.  These are the same seminars, so feel free to pick the one that fits with your work or home location. 

The South metro seminars are on Monday the 15th and Thursday the 18th from 6:30-8pm at the Cornerstone Mortgage office located at 436 Gateway Blvd. in Burnsville.  I will be presenting these steps with trusted partners, Brandon Hedges — Homes of Minnesota Team, as well as Steve Howe – Minnesota Real Estate Team.  We will help you take that first step to home ownership. 

If the North metro is a better fit, then join us Thursday the 25th from 6:30-8pm at the Shoreview Community Center — 4580 Victoria St N #203.  This time, I have the pleasure of presenting with Steve, as well as Tony D’Agostino, also with the Minnesota Real Estate Team. 

Trust me — you will go away knowing so much more about the process AND will feel more comfortable now that you’re armed with information – info that many lenders just don’t share!!  Both will be a fun and educational evening. 

Please register by calling 952-808-0042 as space is limited.  Hope to see you there!

*ALL of our team’s seminars are FREE of charge. Cornerstone Mortgage is proud to be a drop-off site for the CAP agency, which is a non-profit organization that collects food items and gently used clothing for Scott, Carver and Dakota Counties. If you can, please donate a canned food item, baby food or clean clothing so we can continue to support the families in need in the communites we serve!

How do you get started buying your first home — short of actually looking at houses or driving around on a Sunday and visiting open houses?  There really is a “first” step in the home buying process.  It’s to get pre-approved.  Now, don’t mistake pre-qualify for pre-approval.  These are two totally different thing!  A pre-qualification is nothing more than gathering some info on your income, assets and debts to let you know the amount you can afford for a house payment and a sale price.  This process does not hold any water and certainly doesn’t tell a seller you can get home financing. 

Being pre-approved means a couple of things.  First, you’ve applied for a loan – which can be done via the phone, in person or mycompany  website which is the option many take.  Our online application is a secure site which will only take you about 5-10 minutes, depending on how long it takes you to type!!   A one-on-one meeting is not necessary at this time, BUT, I do suggest we meet PRIOR to you looking at homes.  There is a lot to learn about the process, the money you need to purchase a home and the different loan programs and first time buyer programs you could qualify for.  I would be doing you a huge disservice if we didn’t take the time to meet.  Generally, my meetings take 1-2 hours.  I try so hard to keep them manageable for you, but it’s my goal that you leave the appointment with a full understanding of what happens next.  And, you feel like ALL of your questions have been answered.

The second piece to a pre-approval is pulling your credit report.  The credit report is important for a few reasons.  First, regardless of whether you are buying your first home or fifth, you must have at least a 620 credit score.  Though it is true that loans insured by FHA (Federal Housing Administration) and VA (Veteran’s Administration) do not have minimum score requirements, it just doesn’t matter.  FHA and VA are not buying or servicing the loan — the end investor is.  THEY are the ones requiring the 620 score.  And, there are some investors that require a 640 score.  This part of the pre-approval puzzle has become crucial to qualifying for financing.  It didn’t used to be this cut and dry.

The third part is submitting your loan to an automated underwriting system or to an underwriter.  In order to confirm your pre-approval, it’s important that I collect documentation to support the information you provided on the loan application.  The following documents will be required from you to complete this process:

-most recent paystub

-last 2 years W2s AND last 2 years federal taxes (it’s the last THREE if you’re applying for a first time buyer program)

-most recent MONTH bank statement, all pages, all accounts

-copy of your driver’s license (this is part of the Patriot Act that came about due to 9/11)

-any court papers, such as bankruptcy, divorce or child support

Because everyone has a different situation, there may be more documents requested.  For instance, let’s say you had a $3000 deposit into your account from the sale of a car.  Your “extra” paperwork would include a copy of the title, cashier’s check you got for the sale and a copy of the blue book value to substantiate the value matches what you sold the car for.  Now you may be asking why this is any of our business, and truthfully, I would do the same thing too.  All lenders want to source the funds you receive.  If you have deposits other then income, then lenders want to know where the money came from — if it’s a loan, then we need verification of that and need to count payments in our debts.  If it’s a gift, then we need to document that according to the specific program you’re doing.  This can be a lot of back tracking which is why during our appointment, I will advise you what NOT to do while in the home-buying process.  It’s better to know what you need to get to verify deposits then having to re-create documentation that may not even exist.

One of the main reasons this is the FIRST STEP in the process is two-fold — first, it insures that you can get financing and two, you will know what price range you can look at, as well as what payment you’re comfortable with.  Sellers will require that you’re pre-approved.  And just so you know, all pre-approval letters are NOT created equal.  Just because a lender says you’re approved doesn’t mean this is true.  Some lenders don’t take the step of verifying the information provided.  Some don’t understand the rules of the first time buyer programs or don’t know the ins and outs of the loan type you’ve applied for.  The paper the letter is written on is sometimes worth more than the actual “pre-approval”.  More times than I can count, I was presented with a pre-approval letter from another company via the Realtors I work with.  Low and behold, they were coming to me to “save” the deal because indeed, the person was NOT pre-approved.  So, how can you tell?  I guess the only suggestion I have is to work with a reputable company, one that’s known for your special needs (i.e. first time buyer programs).  Listen to your agent’s advice.  Even then, they aren’t always connected to the right people.

Woohoo — you’re pre-approved.  Now what?  It’s time to get excited because the fun begins — you get to look at houses and find one that fits your needs, as well as your budget.  Speaking of budget.  This is a VERY important thing to keep in mind.  A lender can tell you your max payment is $1500, but in your heart and on paper, you know going over $1200 would put you in the poor house.  Staying withing your comfort zone is key to having a great home -buying experience.  I don’t plan to make your house payment so you would be wise to have a number in your head for that “max” payment you’re willing to exceed.  When you do put some numbers down as a budget, don’t forget things like insurance, meals out, entertainment, clothing, etc.  Many people forget these things — hey, even a coffee each day adds up!  Another note … being pre-approved with take a lot of disappointment away from the process.  If you start looking at houses you THINK you can afford and then come to find you don’t fall in that price range; you will be frustrated and bummed.  Believe me; I’ve seen it.  It’s better to know what your range is before you start looking — either on your own or with an agent.

So, take the first step to your home buying experience by getting pre-approved.  It’s the one piece of this home buying puzzle that will help all the other pieces fall into place.

So, what is it?  How much will it cost me?  When do I pay it?  Is this money in addition to all the costs on my good faith?  All very good questions that I plan to answer.  If you’ve owned a home in the past, this term isn’t new to you, though the information may still be important.  As a first time buyer, this information is VERY important to know.  Let’s start by saying “earnest money” should have been something that was explained to you by your Realtor or lender in the first meeting.  If not, then it’s time to move on.  Here’s why.  Earnest money is money you will need prior to closing on a house.  It’s real money you need to have saved or gifted.  It’s not just play money that goes with a purchase agreement.

Here’s the answer to those questions above.  It’s a check you write that is presented with your offer to show the seller you’re “earnest” in buying their home.  The amount can vary from $500 and up, the most common amount being $1000 or $1500.  You DO need to have this money in your account.  Once your purchase agreement is accepted and all contingencies have been cleared – i.e. inspection on the home passes and you plan to move forward — the check is cashed.  Here is the crucial thing.  If you’re doing a first time buyer program that requires you to have some of your own funds into the transaction, this money CAN be applied as such.  This means that the money does need to be yours, not a gift and not a deposit from somewhere else that can’t be traced.  The earnest money IS part of your down payment.  It will come off the bottom line at closing for the funds you need assuming we, the lender, can prove it cleared your bank account.

Can you get it back if you bail?  Ha, good question.  If you choose not to buy due to an unacceptable inspection, then yes, you can.  If you cannot secure financing, more often than not, this would also qualify to get it back.  If you don’t perform in a timely manner on the purchase agreement, back out or otherwise, I wouldn’t count on getting it back.  Plus, the seller could sue for damages — like time off the market.  Working with a knowledgeable Realtor will help you understand the ins and outs of getting it back if necessary.

There you have it — earnest money.  When going out to look at homes, don’t leave home without it — your checkbook, that is!  You never know when you will come upon the house you want to make an offer on.

Okay, so this isn’t new news.  This is the third go-round with the first time buyer tax credit.  The subsequent tax credits have been ”bigger and better” with new additions, making the most recent credit the “best”.  Remember last year — the tax credit that would expire at the end of November?  Wow were people hustling to get their home loans closed by that date. There was a call to action, an actual deadline.  Buy your first home now or lose money!  Let’s get real — you can’t lose money you don’t have, so that wasn’t a great way to get people off the fence and buy.  It was funny how first time buyers were coming out of the woodwork last fall to “cash-in”.  Many of those buyers are still waiting for their “check in the mail”.   It will come and that’s the good news.

But here’s the better news.  The government is willing, yet again, to pay you to buy your first home.  Oh, and if you’re not a first time buyer, no problem.  You get to reap the benefits too if you meet a few qualifications – you must have lived in your home for at least 5 consecutive years out of the last 8 years.  For the non-first time home buyer, you can get up to a $6500 tax credit!  For the first time buyer, you could pocket up to 10% of the sale price with a maximum amount of $8000.  Seriously, I wish I was in the market to buy a home.  There are income restrictions, which most people will fall under, so it’s a mute point.  There has been some talk out there that you can use this tax credit as down payment for your home.  Hmmmm, wouldn’t that be nice … getting money for buying a home prior to actually buying it.  Essentially, this was ixnayed by most, if not all, non-profits because it was too risky to be fronting that kind of money.  Makes sense to me.

The current tax credit is the last tax credit, so they say.  When it’s done, it’s done.  No more Mr. Nice Government.  So what do you have to do to qualify?  Buy a house.  Yep, for the most part, it’s that simple.  Get an offer accepted on your first home, or subsequent home, by April 30th, 2010 and close by June 30th.  My guess is you would have already filed your taxes by the time you close.  Well, I hope so since taxes are due April 15th.  No worries.  You can complete a few forms, the 1040x amendment to your personal taxes and the 5405 which is the specific form for the home buyer tax credit.  This way, you won’t have to wait to file your 2011 tax returns.  Oh, the stuff you can buy to fix up your first home!  Not that you have to use it this way, but the government’s philosophy behind all this is that you will go out and “stimulate” the economy by buying goods and services.  It would sure help me if you did, but there is nothing wrong with using that money to pay off some debt or set aside savings — all are good uses of FREE money!!

But wait; there’s more — can you hear the infomercial music?  If you are a first time buyer, you can use a down payment assistance program and STILL get this credit.  There is plenty of money out there just waiting for you to use.  Best part about this money … it’s totally forgiven if you live in your home for three years as your primary residence.   That’s another blog on it’s own.

So, assuming the government keeps their word and doesn’t extend this tax credit, you do need to act NOW.  I mean, come on, houses at all time lows, rates at all time historic lows and money to help you fund your down payment.  Wowsers, can you say “incentive”?  I think I have beaten this topic a bit too much.  My advice is to ONLY buy if the time is right for you.  Sure, the call to action couldn’t be stronger.  But, if you’re not financial willing or able or have commitment issues, then wait.  There is no reason buying your first home or buying another home if your conscience is saying “don’t”.  I would hate that the pressure to “act now” pressures you to buy.

Feel free to give me a call or email if you want more information on this.  And please, only “act” on this if you won’t regret it later.