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From Renting to Buying: The Home Plus Program

by Karen Picarello

If you are currently renting, the transition to buying a home can be financially impossible with closing costs and a down payment as a typical requirement. If you are a first-time home buyer with no military background, a federal FHA loan may be an appealing option. However, if you are buying in Arizona, the state has a Home Plus program that can help get a person over the financial hurdles of the home buying process.

Renting a home is a good short-term option for many people who are building credit or saving for a down payment, but it is not a good investment in the long term. That's why those who think finances are getting in the way of home ownership should look into assistance from federal and state programs. 

What is The Home Plus Program?

The Home Plus program is a state program created and given by the Arizona Industrial Development Authority, and it gives new home buyers a 30-year fixed loan for a home along with down payment assistance. The down payment assistance is given as a type of second mortgage, but don’t let that stress you. The loan is a three-year, no payment, no interest mortgage that is forgiven over the term of the lien. This loan can be used for a down payment or for closing costs.

What are the requirements?

There are some requirements for the Home Plus Program, and a minimum credit score is one of them. A range of down payment assistance percentages are available for home buyers with a minimum credit score of 640 to 680. If your credit is below this, you cannot qualify. However, these credit scores are not considered good, and you may be able to get your credit up to “average” quicker than you think.

Other requirements include a maximum income of $99,170, and the price of the home cannot be more than $396,680. A homebuyer education course must be completed by one borrower before closing, and the home must be a primary residence.

Basically, if you don’t own a home, and your financial situation seems to be prohibiting home ownership because of closing costs and a down payment, the Home Plus program may be the solution.

Let’s face it. Your rent payments are simply being thrown away into the abyss of monthly bills and payments made in order to have basic survival needs met like shelter and electricity. That money could be invested into property ownership, and financially, it is not impossible. Ask your mortgage broker or lender about the Home Plus program. It could be the help you need to get the homeownership process up and going.

How to buy when mortgage rates are rising

by Karen Picarello

If you are looking for a home, you’ve likely heard that mortgage rates are rising. This can be a major problem for potential homeowners who can have hundreds of dollars added to their mortgage payment. Additionally, home values have gone up, so one could say it’s a seller’s market. That does not mean you are out of luck when it comes to purchasing a home.

Markets can sway back and forth very quickly, but they can also take time to recover, so waiting to purchase a home may not be the best option when it comes to living a healthy, stable lifestyle with a comfortable home. That is why we have created a list of ways to protect yourself from the instability of the market and get a good price and mortgage rate even when the market is tough.

3 Ways to get a good deal when mortgage rates are high:

1. Improve your credit score

After the housing crash of 2008, subprime loans were taken off the table for people with little to no credit and no tangible way to make a house payment. However, there are now “nonprime” loans available for people with credit scores as low as 500. Think they are getting good mortgage rates? Think again.

Mortgage companies are in it for the money, and it is a risk-reward game. Low credit means higher risk, which means you are only getting a loan if the mortgage company is going to make more money.

Reduce your rate to the minimum by keeping a healthy FICO credit score. This may mean waiting a little while to prove good payment histories or paying down some debt, but it is the primary way to get a good mortgage rate.

2. Consider a 15-year

A 30-year fixed rate loan is standard, but cutting that time in half does not cost nearly as much monthly as one would think. It may only cost an extra few hundred dollars a month, and it greatly reduces the amount that you’d end up paying in interest regardless of the rate.

Here is a link to a 15-year mortgage calculator.

3. Lock in your rate

Once your loan is approved, your mortgage broker can lock in your rate. If you are buying in a market where interest rates are increasing, this can save you a lot of money, as mortgage rates can be locked in for months. Get a mortgage broker who is market savvy, and he or she will lock in the rate when the time is right.

Rising mortgage rates can be discouraging to the potential home buyer, but they don’t have to be. A good credit score, shorter pay-off period, and a locked in rate can create a condition that minimizes the effect of the market on the purchase.

Budgeting for Home Ownership

by Karen Picarello

 

Home ownership can be an exciting time, particularly when it is your first. However, one thing that prospective homeowners sometimes underestimate is the financial burden a home can be. While owning a home is still a great investment usually, it will require considerable amounts of money to be spent upkeeping the property. This cost can increase drastically based on a few factors, so make sure you have a good idea of what you will be spending annually to keep your home valuable and safe.

  1. Taxes and Fees. Property taxes can be incredibly expensive. While you will need to investigate the expenses for owning property in your area, forgetting about them can be financial suicide. Sometimes, these will be bundled into your mortgage payments. Either way, make sure that you have a good idea of what you will be paying in property tax. Additionally, there may be things like homeowners association fees which eat into your budget.
  2. Upkeep. One of the major things new property owners tend to be surprised by is how much money needs to be spent on a house to keep it in good condition. Not only will you need to do things like keep the grounds clean, but you will periodically need electrical work, plumbing, roofing, and all appliances will need replacing and repair from time to time. A decent rule of thumb is to keep 2% of the value of the home as the expected yearly maintenance cost. However, if your home is older, or has other mitigating factors, this cost could be higher. A pool, or a large footprint could both increase cost.
  3. Finally, there will need to be expensive repairs which fall outside of normal upkeep which will need to happen periodically. A new roof, or kitchen is a good example. Sometimes, you will need to spend 10-20000 dollars or more at once to make a major repair. It is recommended that you put away a decent chunk of change so that when these large bills come due, you are able to pay them off immediately. A mortgage is generally a fairly reasonable loan, but if you are forced to put repairs on something like a credit card, you will quickly be racking up a lot of interest.

Before you purchase a home, make sure that you take into account more than just the sticker price when budgeting. If you do not have a strong consistent source of income, you may come to regret your purchase.

Fees, Taxes, and Unexpected Costs

by Karen Picarello

One of the most frustrating things a homebuyer or seller might experience when attempting to make a real estate transaction are all of the small costs which you will incur during the duration of the process.  Unexpected or larger than expected financial burdens can end up making the entire process much more expensive than you had originally planned for. Thankfully, there are a few things you can do to make sure that you don’t end up going far over budget.

The first thing you will need to do is consult the experts. Experienced realtors, legal professionals, and financiers will all have gone through this process many times before, and can be a great source of knowledge about what to expect. Working closely with your realtor can help you to get a list of potential expenses which you can budget for. Additionally, making sure all paperwork and payments are done promptly and correctly can help you to avoid unexpected fees. Employing experts who have experience and will get things right the first time will not only save you time, but area also likely to save you money in the long run. Penalties, taxes, and fees can be levied if certain items are not handled correctly and professionally. You could even end up losing a buyer if you fail to fulfill your parts of the transaction expeditiously.

While gathering this type of general information can be very useful, you will also need to make sure that you gather the information relevant to your specific situation. For example, if you are selling a home, make sure that you conduct a reasonably thorough home inspection fairly early on. Knowing the condition and marketability of things like the roof, the electrical system, and the plumbing can help you estimate how much money you will need to spend in order to make the property marketable.

Buying or selling a house can be a stressful time, and you will certainly want to make sure that it is done correctly the first time. When it comes to budgeting expensive properly and avoiding unnecessary delays or payments, your number one priority should be consulting experienced professionals who will be capable and motivated to move things through as quickly and prudently as possible. Second, you should be making sure that once you have a good idea of what expenses there will be, that you are prepared for them and have money put aside.

Financial Planning for Real Estate Purchases

by Karen Picarello

If looking to make a real estate purchase (whether as a residence or an investment), you should make the effort to be fully aware of all the costs that might be incurred during and after your purchase. Too many prospective homeowners look only at the price tag, and end up seriously under budgeting for their purchase. While you might be able to afford the base price, purchasing a home will force you to incur many other additional costs, and you will certainly want to anticipate and plan for them. Here are a few areas that many people fail to budget for.

  1. Maintenance. If you are purchasing a property, you will need to upkeep it. This is particularly important if you are going to be renting it out, but could also be important when it comes to insurance. You might find yourself on the hook for expensive repair bills before an insurance company will insure you. These might be things like electric system overhauls, roofing, or plumbing. Depending on the condition of the house and the local building codes and regulations, your initial and recurring costs will vary, but make sure you make an effort to anticipate them.
  2. Taxes and Fees. Not only will you be facing property taxes, but you also will need to pay various fees and potentially taxes associated with the sale. Brokers fees, as well as fees for inspectors, certifications, and legal documents are all potential costs you will need to be prepared to pay. With these costs though, the best way to save money is to do them correctly the first time, as there are often penalties associated with failure to properly take care of your legal obligations.
  3. Finally, your financial history can drastically affect the financing that you get. If you have good credit and a strong financial history, you will likely be able to get a better rate on your loan, with less money down. Conversely, if you have poor credit, you may end up paying a lot more, both in the long run, and as a down payment.

In short, if you are looking to purchase a home, take the time to plan out all of the costs associated with the purchase. Consulting real estate and financial experts can help you get a good idea how much cash you should have in your specific situation and location before looking to make a purchase. 

Finding Value in Real Estate

by Karen Picarello

Real estate can be more than just a place to live. For many people, it can be a way to make money, an investment, or even a hobby. No matter your walk in life, looking at real estate in terms of more than your living needs is a great way to further your financial stability and diversify your income. However, I would caution against any thought that it is easy or completely safe to make money in real estate. Here are a few different ways to look at real estate as an investment, as well as a few cautions to keep in mind.

Rental Properties

It seems like everyone wants to have a rental property nowadays. And the thought is certainly appealing. At its best, it allows you to hold an appreciating asset while getting monthly payments to offset your purchasing costs. However, getting a loan to purchase an investment property such as this is not always easy. And a loan will be necessary unless you have substantial liquid assets. Secondly, most people wanting to be landlords forget about the amount of work that goes into maintaining a successful rental. Not only will you be required to provide substantial amounts of expertise and labor, but maintaining tenants will have its own sets of challenges. You can’t buy a property and simply expect money to start coming in every month. There will be insurance, financial, and legal steps to take before you can even consider finding a tenant. And once you do, you will have to deal with them. Hopefully they will be respectful and prompt with payments, but this is not always the case, and you should be prepared for the worst.

Flipping Houses

Another common method for using the real estate market to earn money, some people look to buy properties with the intent to resell them for a higher price, typically within a year of purchase. Flippers will typically renovate the property, although what this entails can vary wildly depending on the person in question. Again, this is not a risk free or easy endeavor. You will need to be quite knowledgeable about many types of renovating work if you plan on doing it yourself, or have a sizeable budget if looking to pay a contractor. Additionally, you will need to avoid downturns in the housing market, as these can drastically decrease your chances of reselling at good value. 

Should I Buy a Home Now?

by Karen Picarello

I'm often asked if this is a good time to buy a home. Some clients are concerned that home prices may fall further than they have already. They are assuming that the best course of action is to wait for the bottom in the market and then buy. The problem with this approach is that you don't know where the bottom is until you see it in the rear view mirror, meaning until you've missed it!

Home prices are one factor in determining your cost of ownership, but so are interest rates and financing availability. Even though interest rates have gone up in the last six months, they are still near historic lows. Since your monthly mortgage payment is a combination of paying down your principal and paying the interest owed, if home prices come down a little further but interest rates go up, it could cost you even more to service a mortgage on an identical home!

While a home is a major investment, it is also the center of your personal life. It's important to live in a home that reflects your taste and values, yet is within your financial "comfort zone." To that end, it may be more important to lock in today's relatively low interest rates and low home prices, rather than to hope for a further break in prices in the future.

Please give me a call if I can be of any assistance in determining how much home you can afford in today's market.

Displaying blog entries 1-7 of 7

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TeamPicarello
RE/MAX Fine Properties North Scottsdale
21000 N. Pima Road, Suite 100
Scottsdale AZ 85255
Office: (480)860-8733
888-548-8713
Fax: (480)860-8755