Dean Graziosi Real Estate Blog

You’ve figured it all out: You want three bedrooms, 2 bathrooms, and hardwood floors throughout.  Central air is a must.  Gas heat is negotiable.  While a garage is essential, you prefer a two-car but can settle for a single bay, as long as the plumbing and electric are new and the foundation is sound.  And you want it all on at least two acres in a low-traffic neighborhood perfect for raising children.

Now you’re ready to start looking for your new home!  Right? 

Well, maybe not. 

Unless you’re one of few Americans who can drop a lump sum of money into the seller’s hand, you need to qualify for the loan that is going to help you purchase your future dreams.  And while the financial challenges of purchasing a new home can seem overwhelming, the following steps will prepare you financially. 

You should start this process a year before you plan to buy your first home.

Step 1: Give yourself a little credit

Banks and mortgage lenders want to know two primary things about you before they will give you money: (1) that you are going to pay back the money you borrow from them, and (2) that you are going to pay it back on time.   Therefore, lenders will place great emphasis on your financial history, basing your likelihood of timely repayment on your past willingness and ability to do so.

If you have struggled with prior loan repayment, or have yet to establish any credit references, you should start to develop some.  One relatively easy way to begin to establish credit is to deposit $1,000 in the bank and take out a 12-month, $1,000 loan.  The goal is to pay this loan off 6 months. If you are able to do this at least twice during the year before you apply for a home loan, you will begin to establish a record of paying off your loans on time.

Step 2: Raise your score
Remember: high scores = low interest rates. Both of which you want.  There are some things you can do to raise our credit score NOW in order to get those lower interest rates later.  While paying all your bills on time is critical, it is also essential to pay more than the minimum monthly balances on your credit cards, and to maintain zero (or very low) balances on all your credit cards.  Also, it is possible to negotiate with creditors to have negative items removed from your credit report. 

Step 3: Save for a Down-payment
Again, start saving NOW!  Budgeting is essential, and you can’t begin this process too soon. Always remember that the down payment and closing costs are additional financial obligations beyond the purchase price; by setting aside a certain amount every pay period for at least a year, you can accumulate enough to cover these costs when you are ready to buy.

Finally, remember this:

Start saving now.  Start planning today!

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As soon as the Homebuyers Tax credit expired, housing prices declined in three of the four main housing sectors.  The real estate research firm of Campbell Surveys released their June report showing the following changes:

·                     Prices for move-in ready foreclosed properties fell by 8.8 percent

·                     Prices of the average short sale declined by 6.3 percent

·                     Prices for non-distressed housing fell by 4.6 percent

·                     Prices for damaged foreclosed properties increased by 5.9 percent.

“These price declines are related to the decreased homebuyer demand surrounding the end of the tax credit,” said Thomas Popik, the research director at Campbell.  “Some housing market analysts had expected demand to remain strong through the end of June, but in retrospect it’s clear that the peak of first-time homebuyer activity occurred three months earlier, in March.”

The Campbell Survey confirmed with miscellaneous reports from local real estate agents who say that today’s buyers begin negotiations by discounting $8,000.  So although prospective buyers may have missed out on the federal tax credit, they are capturing it through their lower offers.

The Campbell Survey indicates that declining housing prices are expected to decline through August.  The Campbell survey includes information obtained from 3,000 real estate agents.  Pricing analysis is based upon contracts closed through June.  However, the interviewed real estate agents indicated that contracts scheduled to close in July and August were significantly lower than those closed in June.

This is bad news for the troubled housing market but good news for serious real estate investors.  One surprising report seems to suggest that Florida real estate is making a comeback.  Prices are still depressed, but the volume of sales is on the rise. 

Analysts believe Florida is one state where investors see potential.  Supply is high and the seasonal rental demand remains high.  That formula spells profit for most investors.   

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The results of the Obama Administration’s 2009 First-Time Homebuyer’s Tax Credit helped to generate more than 1.1 million sales that closed prior to November 30^th, 2009.  In a market desperate for good news and sustainable initiatives, the National Association of Realtors, the country’s largest trade organization, lobbied hard for an extension of the bill and for expansion of the benefits.

While the government declined to pass the recommended increase in the outright tax credit to $15,000, the Obama team did expand the plan to cover existing homeowners seeking to relocate with a maximum $6,500 tax credit.  Prior to the great recession, the American homeowner typically bought and sold more than 8 residences prior to retirement.  Since the recession, existing homeowners have been sitting tight, significantly lowering the demand for existing upscale homes.  High-end prices have taken the biggest hit in terms of value and units sold.

The new initiative also increased the income eligibility for single filers and for joint filers.  The single filer can now earn as much as $125,000 while joint filers can now earn as mush as $225,000.  The value of the new purchase cannot exceed $800,000 and qualified applicants can claim up to $6,500 or 10% of the purchase price.  The tax credit for first time homebuyers remains stable at $8,000.

An existing homeowner must have occupied their home as a primary residence for the last three years.  First time homebuyers and existing home purchasers have until April 30^th, 2010 to enter into a contract for purchase and sale and must close the transactions on or before June 30^TH, 2010.

The Administration and the FHA have greatly streamlined the application and acceptance mechanics, which were once considered laborious.  As realtors and mortgage lenders became familiar with the 2009 program, it gained wide acceptance.  As such a contingency for tax credit acceptance can now be included in most real estate purchase offers.  In fact, new programs allow for the use of the credit to be applied to closing costs and help with the down payment.

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