First Time Home Buyer

Everyone wishes to live in the dream house they always picture in their minds when they were kids. If you have saved up and worked hard throughout the years, then you are just a few steps away from that dream. But reality bites, home buying needs a lot of serious preparation to ensure that everything would come out right.

If you are excited to buy that house you always wanted, be prepared and read through these mortgage tips:


Pay your debt

Instead of saving up for your house, why not pay off your debts first? This is the more sensible thing to do than saving thousands of dollars in your bank. Debts, including credit card debts, actually limit your capability to save. Also, when applying for a home loan, lenders would always look at your credit card record as a reference on how much you can borrow from them.


Evaluate how much money you can afford

There are two things you need to know before buying a home: How much you are willing to cash out as down payment and how much you are willing to borrow. Your mortgage loan, on an annual basis, should never reach 30% of your annual gross income.


Understand Loan Types

There are government-sponsored institutions (Freddie Mac and Fannie Mae) that can offer home loans at a very affordable price. You can also head to private lenders who offer a great package for first-time homebuyers. Going to your bank and applying for a mortgage loan is also a sound option.


Real estate shopping

If you got all your finances all figured out, then you can start shopping for you house. The first thing to do is to get in touch with a reliable real estate agent that can show you a number of options. It is important to choose the right neighborhood for you and your family. Make a quick wish list of the things you want and use this as a reference before you purchase a property. It is important that you personally inspect each house that you are looking at buying.


Making an offer

If you already decided which house to buy, discuss it with your real estate agent and make your offer. Negotiate with the seller with regards to pricing and other terms and conditions. Remember to put everything you settled and agreed on in writing. Be sure to read and reread all the statements in any contracts before you sign them.

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This year, many first time home buyers will enter the real estate market to buy a home. One of the main reasons for this is the phenomenal $8,000 tax credit available to first time home buyers. If a home buyer completes the purchase of a property between January 1, 2009 and December 1, 2009, he or she is eligible for this credit.

The U.S. government's definition of first time home buyer has an expanded meaning, too. According to the National Association of Realtors, "A person is considered a first-time buyer if he/she has not had any ownership interest in a home in three years previous to the day of the 2009 purchase."

The $8,000 tax credit is applied to the Adjusted Gross Income (AGI) on a tax return. Single taxpayers must make under $75,000 and married filing jointly taxpayers must make under $150,000 to qualify for the tax credit. The first time home buyer tax credit is applied directly to tax liability, and if liability is less than a credit, a refund check is issued. The home purchased must be worth $80,000 to qualify for the full credit. If the property purchased is less than $80,000 the taxpayer will receive a 10% credit on purchase price.

A study of my own real estate market in 2008 which includes Richmond, Williamsburg, James City County, York County, Newport News, Hampton and Yorktown revealed that prices have fallen from 15-17% depending upon the location. This decline in pricing makes buying a home even more affordable for the first time homebuyer. Some homebuyers who purchase property this year could end up with equity in the home right away, depending upon how deeply the seller has discounted the property.

A popular way for homebuyers to try to save money is to locate foreclosed properties. I recommend that first time homebuyers avoid the purchase of foreclosed properties. Many of these properties need to be fixed or updated. The only exceptions to this would be if a homebuyer is in the building trades or has excellent resources in hand in which case he or she might want to consider foreclosures.

Short sales are also becoming more numerous. A first time home buyer could potentially save a great deal of money by purchasing a short sale property. However, they must be patient. This means a first time home buyer may have to wait from six to nine months for the banks' decision about the short sale. After waiting so long, some short sales will not even come through, and the buyer has to start all over again. Many people looking for their first homes do not have the time or the patience for short sales, either.

There are two great government lending programs in place now and both require good FICO scores. The first is the 3.5 % down Federal Housing Authority (FHA) loan. Greg Caldwell, a Mortgage Banker with Old Virginia Mortgage, Inc. said, "The first time home buyer may qualify for this loan with a credit score of 620 or more. The second is 100% financing -- still available on VA Loans." With many of our service men and women returning from Iraq this year, VA Loans could once again provide a great financing option for those who served our country.

First time home buyers need to avoid a common pitfall in the home buying process. As they drive through a desirable neighborhood, often buyers will see a property they are interested in and telephone the listing agent to ask questions about it. Then the potential buyer will ask the listing agent to represent them. This is considered dual agency, which means the listing agent becomes the buyer's agent on that particular property, too.

It's not a sound idea to have the listing agent represent you on the purchase of your first home. More objectivity is lent to the buying process if the first time home buyer locates a buyer's agent on their own, and initiates the search (or telephone inquiry about the property) through their agent. A buyer's agent will have the purchaser's best interests at heart.

With all of the recent changes in tax laws, property pricing, and government assisted lending programs, the first time home buyer should be enticed to purchase a home this year.


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