10 Tips for First-Time Homebuyers

1. Be picky, but don’t be unrealistic. There is no perfect home.

1. Do your homework before you start looking. Decide specifically what features you want in a home and which are most important to you.

1. Get your finances in order. Review your credit report and be sure you have enough money to cover your downpayment and your closing costs.

1. Don’t wait to get a loan. Talk to a lender and get prequalified for a mortgage before you start looking.

1. Don’t ask too many people for opinions. It will drive you crazy. Select one or two people to turn to if you feel you need a second opinion.

1. Decide when you could move. When is your lease up? Are you allowed to sublet? How tight is the rental market in your area?

1. Think long-term. Are you looking for a starter house with the idea of moving up in a few years or do you hope to stay in this home longer? This decision may dictate what type of home you’ll buy as well as the type of mortgage terms that suit you best.

1. Don’t let yourself be “house poor”. If you max yourself out to buy the biggest home you can afford, you’ll have no money left for maintenance or decoration or to save money for other financial goals.

1. Don’t be naïve. Insist on a home inspection and, if possible, get a warranty from the seller to cover defects within one year.

1. Get help. Consider hiring a REALTOR^Ò.

For more questions please feel free to email me at Info@eNOVAHomes.com or visit me at www.eNOVAHomes.com

The Incredible Shrinking Down Payment

I came across this great article in Washington Post and could not help sharing. I remember when I first bought my home 20% was something expected in the market otherwise builder would think you are not qualified to purchase a home.  Thanks Kenneth R. Harney! Read On!

Does anybody remember the old days when home buyers actually made sizable down payments, often 20 percent or more, when they bought their first house?

New national research reveals just how dated and quaint that concept has become, because of rocketing home prices that have far eclipsed buyers' incomes and savings.

From mid-2005 to mid-2006, according to a statistical sampling of a representative group of 7,548 purchasers, nearly half of all first-time buyers financed the entire transaction, obtaining mortgages in the full amount of the home price. Another 30 percent put down 10 percent or less, and 20 percent put down 5 percent or less.

The research was conducted by the National Association of Realtors, using information on home transactions supplied by Experian, a major credit and realty data firm. The median down payment of first-time purchasers, according to the study, was just 2 percent. In other words, the median-size mortgage for first-timers represented 98 percent of the home purchase price.

The highest loan-to-value ratios for first-time buyers were in the South, where the median mortgage amount was 100 percent of the sale price. In the West, the median was 99 percent; in the Midwest 98 percent; and in the East 96 percent.

By comparison, the typical repeat home buyer nationwide invested a median 16 percent as a down payment to purchase a replacement home, usually from the proceeds of a prior sale, and financed the remaining 84 percent.

Where did first-time buyers obtain the money for even their modest down payments? Seventy-three percent of the survey respondents said at least part of it came from savings accounts, and 22 percent said relatives or friends chipped in as well. One in 10 said their down payment came from liquidations of stocks or bonds.

The biggest down payment resources for repeat buyers were the profits they made from prior sales. Sixty-two percent of repeat buyers depended on those resources. But 40 percent also took money from savings accounts to help swing the deal, and 6 percent sold stocks or bonds. Just 3 percent got help from relatives or friends.

Besides high prices, a key reason for the relatively high levels of leverage being used by both first-time and repeat buyers has been the explosion of low-down-payment options by mortgage lenders and insurers in recent years.

Prior to the mid-1980s, the plain-vanilla, 20-percent-down mortgage was almost the only game in town. Now, 100 percent financing -- often using a "piggyback" arrangement that combines a first mortgage of 80 or 90 percent of the home value combined with a second mortgage or credit line for 20 or 10 percent -- is common. So are 5 and 10 percent down payment conventional loans with private mortgage insurance, and 3 percent down payment Federal Housing Administration loans.

Although these minimal-down plans have been highly successful in pushing the homeownership rate in the United States to record heights -- currently just under 69 percent -- that's happened in an atmosphere of steadily appreciating home prices and values. Since the mid-1990s, the possibility of low or no appreciation hasn't been a concern for buyers using minimal down payments in most parts of the country. That's because if you could obtain a loan that got you into a house with almost no money down, there was no problem: Appreciation, sometimes at double-digit annual rates, would take care of you from then on.

But that's no longer the case. Buyers who made small down payments in 2005 and 2006 face a starkly different prospect: They started with minimal or no equity, and they may still be in the same position. Worse yet, they could be temporarily "upside down" on their mortgages, with a principal balance greater than their current home value.

The unknown about minimal down payment loans is how they perform in flat or depreciating market conditions. People who bought in hyper-appreciating markets could be vulnerable financially if they have to sell on short notice because of a job transfer or they can no longer handle the monthly payments.

Leverage in real estate slices both ways. A minimal investment can produce impressive returns if the appreciation tide is rising. But it can also expose you to a negative-equity situation when the tide recedes.

The jury is still out on how well highly leveraged recent buyers from 2003-2006 will handle a period of slow growth in their home values. Can they hang on until appreciation returns and raises their equity holdings? The mortgage and real estate industries -- to say nothing of the Wall Street bond investors who've financed trillions of dollars' worth of these loans -- are banking on it.

Spring Market out look for Buyers in Virginia

Many of my seller’s or potential sellers are thinking about putting their home on the market in the spring. As spring is consider to be the best time of the year for the real estate market. Where sellers feel they get the most value out of the home and turn over time is much less.

In this what’s for the buyer. How does a buyer feel? For most buyers spring is a great time because inventory goes up. They have more number of homes to preview and make their decision. It’s a good time to move instead of frigid cold weather.

School year is around the corner and kids can make friends before the next school year began. Consider where we stand in 2007 the interest rate are at rise. With the great economic data coming out for past couple week’s things do look positive.

As most of my past clients know my philosophy is if you are ready I am here!

Every buyer needs to decide for her/himself is it time to be a first time homeowner, investor, move up or downsize. We all want to buy at right time. But who has control over our time. How do we calculate what is the right time. Every one wants to buy low sell high. For my clients I believe bottom line is whether you can afford the mortgage. The monthly payments you are committing for the period you are going to stay in the home does it leave you feeling straggled or a big burden.  We all work hard not just to survive but to enjoy the fruits of our labor.

If you are buying in today’s market you do have positive advantage of interest rate, seller’s paying closing cost, buy down of the interest rates, lowest unemployment rate in Northern Virginia and much more. Call me today we can discuss how I can help you make your decision.

What is Buy-Down Mortgage Loans?

A buydown is an initial lump-sum payment, which allows the lender to reduce the interest rate on a mortgage loan. The borrower "buys down" the interest rate on a mortgage by paying discount points up front. The builder or seller of the property usually makes this buydown payment to the mortgage-lending institution. The lender then lowers the buyer's mortgage interest rate. To compensate the home seller, the purchase price of the home is increased to compensate for the costs of the buydown agreement.

There are two types of buydown mortgages: A temporary buydown is a mortgage where a payment is made to reduce a borrower's monthly payments during the first few years of a mortgage. A permanent buydown is an initial payment that reduces the interest rate over the entire life of a mortgage.

Either type of buydown mortgage can be vastly appealing to homebuyers who suffer sticker shock when they see what their mortgage payments will be for the life of the loan. By buying down their loan with points, they reduce those payments. The points up front will likely be recouped over the life of a 15- or 30-year mortgage, so this is an especially attractive option for customers who have a long time horizon for their home purchase.

A buydown can also be thought of as a subsidy on a 15- or 30-year fixed mortgage, and is made to the homebuyer on behalf of the seller. The subsidy is a fund that the seller contributes to an escrow account. A buydown is attractive to borrowers who believe they will be able to afford a larger home payment in several years, but presently are wary about making monthly payments at the higher current mortgage rate. Most buydowns last one to five years, and the mortgage payment increases at the end of the initial loan term.

Buydown mortgages, once perceived as an advantageous financial choice, have been surpassed by more flexible mortgage loan options.

Financing the Home Purchase:2006 Profile of Home Buyers and Sellers

For most households, purchasing a home is one of the largest financial transactions they will ever make. The majority of home buyers do take out a mortgage in order to purchase a home and so financing is one of several important aspects of the home buying process. There are many financing options available to buyers that allow them to consider the length of the loan term, the use of a fixed or adjustable rate mortgage, and how much of their savings or other assets they want to use toward a downpayment.

In 2006, NAR surveyed recent home buyers about how they financed their home purchase. Included in the survey were questions about whether or not the buyer took out a mortgage loan, what type of loan they used, the amount of the home price that was financed, and sources of downpayment. Results from the survey are included in The 2006 NAR Profile of Home Buyers and Sellers. Below are highlights of that report that focus on financing the home purchase.

Financing the Home Purchase
The majority of home buyers need – or choose -- to finance at least part of their home purchase. In 2006, 92 percent of buyers reported that they financed the purchase of their home. First-time buyers were more likely to take out a loan to buy their home than were repeat buyers. That is likely because repeat buyers often have a sizable amount of equity in a home already, thus allowing them to use the proceeds from the sale of that home towards the purchase of another.

While there is little difference across U.S. regions in the percentage of first-time buyers who financed their home purchase, there was more variation in the use of mortgages among repeat buyers. Eight-five percent of repeat buyers in the Northeast financed their home purchase, while 90 percent of repeat buyers in the other regions used a mortgage.

Financing and Age
One factor that could help explain the difference between repeat and first-time buyers’ opting to finance their home purchase is age. Repeat buyers are typically older than first-time buyers, have higher household income, and may have other financial assets on which to draw in order to buy a home. Buyers 45 years and older are less likely to finance their home purchase than younger buyers, and the share of “financing” buyers decreases significantly after age 65. Older buyers generally have equity from homes they owned previously on which to draw. Additionally, to the extent that older buyers may be downsizing to a less expensive property, the need for mortgage financing may be reduced.

Amount of Financing
while nearly all buyers used a mortgage to finance their home, the amount of that mortgage relative to the home purchase price varied considerably. The typical buyer financed 91 percent of their home purchase. Again, first-time buyers tended to finance more of their home purchase than repeat buyers. The typical first-time buyer financed 98 percent of their home and more than four in 10 financed the entire amount. The typical repeat buyer financed 84 percent of their home purchase and 19 percent took out a mortgage for the entire amount of the home purchase price.

The share of the purchase price financed with a mortgage varied by region. In the Northeast, the typical repeat buyer financed a smaller percentage of their home than did repeat buyers elsewhere. At least half of first-time buyers in the South financed the full purchase price of their home.

Sources of Downpayment
For many home buyers – particularly first-time purchasers – accumulating a downpayment can be a challenge. Savings was the chief source of downpayment funds for home buyers in general, and for 73 percent of first-time buyers. And while repeat buyers can draw on the equity from the previous home – 62 percent of repeat buyers used the proceeds from the sale of a primary residence for a downpayment – still, 40 percent drew on savings for a downpayment. The second most popular source of downpayment funds for first-time buyers was a gift from relatives or friends (22 percent).

There are other sources for downpayment funds besides savings, gifts or equity from a previous home. Ten percent of first-time buyers used the proceeds from a sale of stocks or bonds, as did six percent of repeat buyers. While current tax law allows use of funds from a 401(k) or pension fund – tax free – for a downpayment on a home purchase, only four percent of all buyers accessed funds from such an account for their downpayment.

Types of Mortgages
There are a number of different types of mortgages available to home buyers, although they can be broadly categorized as either fixed rate or adjustable rate. Within these broad categories of mortgages, however, the specific terms can vary widely. Some buyers start with an adjustable rate loan and then “convert” to a fixed-rate mortgage. Others begin with a fixed-rate mortgage that then adjusts the rate periodically. The defining characteristics for most of these mortgages is whether the interest rate is fixed for the life of the loan, fixed for only an initial period of the loan, or whether the rate varies throughout the loan period.

Seventy-one percent of recent home buyers reported that they had a fixed-rate mortgage; 8 percent had an adjustable rate loan. Repeat buyers were somewhat more likely than first-time buyers to finance their home purchase with a fixed-rate loan. First-time buyers were more likely than repeat buyers to start out with fixed-rate loan that eventually had rates that adjusted.

Perhaps surprisingly, three percent of recent home buyers did not know the type of mortgage loan they had.

The Internet as a Source of Information
The Internet has increasingly become a major source of information for both home buyers and sellers as they search for a home to purchase. Of those recent buyers who used the Internet in their home search, 5 percent applied for a mortgage online, and 7 percent pre-qualified for a mortgage online. Four percent found a mortgage lender online after having searched for a property on the Internet.

The Role of Real Estate Professionals
Real estate agents are not mortgage lenders. But because they are the primary source of information about the home purchase transaction for most home buyers, they often are the “ones buyers turn to” for information about financing options. Among recent home buyers, 19 percent reported that their real estate agent provided a better list of mortgage lenders.

A Home is “A Home”
Most households purchase a home because of the desire to “own a home of one’s own.” But the benefits of homeownership extend beyond the value of a home as shelter. Homeownership provides an opportunity to build a nest egg through the accumulation of equity as a home appreciates in value and as the mortgage is paid down. Even in the wake of a slowing housing market, more than half of recent buyers view their home as a better investment than stocks.

For More Information
The questions regarding home financing in the 2006 survey of home buyers and sellers were limited. But more details about home finance – types of mortgages, average/median downpayment, terms, type of lender, etc. – are collected by the Department of Housing and Urban Development and the data published in compliance with the Home Mortgage and Disclosure Act (HMDA). The data is regularly analyzed by NAR. For more information on HMDA data, email NAR Research

The NAR Profile is based on a survey of home buyers and sellers and provides information on demographics, housing characteristics and the experience of buyers and sellers in the housing market. Buyers and sellers also share information on the role of real estate professionals in their home sales transactions. The 2006 survey results are representative of home purchases between July 2005 and June 2006. Consumer names and addresses were obtained from Experian, a firm that maintains an extensive database of recent home buyers derived from county record. Information about sellers comes from those buyers who also sold a home.

What are Spec Homes?

What are Spec Homes?

Any house or condominium that has already begun construction but doesn't have a buyer for it is a speculative or spec home (also referred to as an inventory home). They can range from holes in the ground to completely finished units ready for immediate move in.

Why are specs a good deal?

What makes a spec a spec?

There are several reasons why builders and developers have spec homes.

1. They have started construction for a particular buyer but for a variety of reasons the buyer is now no longer able to purchase the home. If the buyer has selected upgrades for the home the builders are often willing to discount them to move the house.

2. Some builders will build a certain amount of spec homes to have an inventory for immediate sale. Not all buyers can wait to build a new home and some will be looking for an immediate move in. This is where the term originates from, when builders are building on speculation.

3. For condominium developments you can't always just build homes as you sell them. Urban developments are often mid rise, which means building all the units at once. In the suburbs there may as few as 3 units to a building or as many as a dozen or more. It's much more economical to build many units at once, which means the builder will have an inventory of homes to sell.

Advantages

1. They tend to be a good deal compared to building from scratch. There can be significant discounts offered to move the home now.

2. You can buy one now and move right in. New builds can take 8 months to over a year to build and this way you avoid the wait.

3. Depending on how finished the spec home is, you may be able to customize some aspects of it. You may get some of the benefits of a spec home and still be able to make enough selections to personalize the home.

Disadvantages

1. The finish selections and floor plan choices are mostly already made. You will not be able to make the same selections as when building a home.

2. The lot choice is already made. You may like the home but you can't pick which lot it goes on.

3. With building you will have a much larger choice of styles, floor plans, lots, subdivisions and finishes to make. The inventory of spec homes can be small compared to the number of buildable lots that are available.

 Search spec homes at : http://www.enovahomes.com/Ready_to_Move_In/page_1760439.html

Buy or Wait ? Confused?

Lot of my clients ask me whether its a best time or should be wait for market to further do down? Is the bubble busted or not yet? As many of my clients know interest rate is at the lowest, buyers who are in the market are serious buyers and not that many investors or short term buyers.

Everyone needs a place to live whether it is a rental home or a small condo or a large house. If you rent, you are helping pay off someone else mortgage. If you are very new to the area it is a good idea to know the area before making big financial commitment of purchasing a home.

In real estate people say LOCATION! LOCATION! LOCATION! I say no its FINANCE! FINANCE! FINANCE....the reason is pretty simple if you cannot afford the payment location may help you with resell but will you enjoy your home...for which you work so hard.

If you are thinking of buying a home call me for free consulting. At the end if you think you are not ready I will be always their as a friend and your Realtor looking out for your best interest.

 Ritu

7 Reasons to Own Your Own Home

1. Tax breaks. The U.S. Tax Code lets you deduct the interest you pay on your mortgage, property taxes you pay, and some of the costs involved in buying your home.

1. Gains. Between 1998 and 2002, national home prices increased at an average of 5.4 percent annually. And while there’s no guarantee of appreciation, a 2001 study by the NATIONAL ASSOCIATION OF REALTORS^Ò found that a typical homeowner has approximately $50,000 of unrealized gain in a home.

1. Equity. Money paid for rent is money that you’ll never see again, but mortgage payments let you build equity ownership interest in your home.

1. Savings. Building equity in your home is a ready-made savings plan. And when you sell, you can generally take up to $250,000 ($500,000 for a married couple) as gain without owing any federal income tax.

1. Predictability. Unlike rent, your mortgage payments don’t go up over the years so your housing costs may actually decline as you own the home longer. However, keep in mind that property taxes and insurance costs will rise.

1. Freedom. The home is yours. You can decorate any way you want and be able to benefit from your investment for as long as you own the home.

1. Stability. Remaining in one neighborhood for several years gives you a chance to participate in community activities, lets you and your family establish lasting friendships, and offers your children the benefit of educational continuity.

To calculate whether renting or buying is the best financial option for you, use this calculator courtesy of Ginnie Mae: http://www.ginniemae.gov/ypth/rent_vs_buy/Rent_vs_buy.htm.

It Is A Good Time To Decide!

It sounds tired, trite, hackneyed, even a little specious, especially when it's become little more than a marketing slogan used to describe just about any housing market, no matter how bleak or bright.

However, right now, the popular refrain, "It's a good time to buy," resonates with a more resolute ring of truth.

Home sales are taking a dive, prices are tumbling, mortgage rates are relatively low, builders and sellers are offering concessions, and the most recent forecasts say the market is hovering just at or above bottom.

Given no one can actually pinpoint the bottom except in hindsight -- after the market rebounds -- waiting for that elusive place in time is as risky for buyers as it for sellers waiting for the market to peak.

But before you rush out the door in a frenzied attempt to stay one step ahead of the bottom feeders, remember that a "good time to buy" for you may not be the same "good time to buy" for someone else.

Personal considerations trump the generalities.

Instead of making the home-buying decision based solely on market conditions, consider it in a more holistic context.

It's only a good time for you to buy a home, typically, when owning is cheaper than renting and a home purchase is a natural fit for your financial needs, goals, obligations and lifestyle.

Consider market conditions -- it's wise to buy low and sell high -- but also examine your complete financial picture, other goals in life and plans for your family.

It's not easy.

The current market offers a big carrot.

"Today, with the real estate market slowing in many parts of the country, all the market fundamentals show that buyers are now in the driver's seat," said Jerry Howard, CEO of the National Association of Home Builders (NAHB), in a recently release.

"Consider the facts: prices are competitive, rates are low, the selection of homes is high in all price ranges and sellers are ready to bargain," he added.

Right now, however, if you take the plunge but can't tread water until the market again surges with waves of home price appreciation, you could sink.

On the other hand, if you don't take the plunge and home price appreciation swells, well, you could be priced out of the market -- grounded.

"First-time home buyers who choose to 'play it safe' and keep renting are essentially postponing the opportunity to build household wealth. Currently, with rental vacancy rates tightening, they can probably expect to see an increase in the rent they pay. No one can accurately predict the peaks and valleys of the housing market. If you try waiting for the absolute best deal, you could end up literally waiting for years, missing out on the opportunity to become a homeowner while prices are moderating," NAHB advises.

It's a real Catch-22.

Over the long haul, real estate prices and values rise, historically, by an average of about 5 to 6 percent annually. At that rate, the value of homes doubles every 13 years, says the NAHB. Your market may do better or worse.

Will it pay to buy and hold now or stick to your current investment and savings plans now and buy in the future? As you wait to buy, will your financial planning generate the same rate of return or more than you could expect from a home investment?

How will you compare the value of the tangible asset that comes with owning a home? It's not just an investment, but also your own roof over your head.

You don't have to make the decision alone, you probably shouldn't, but you should make the decision.

Get professional financial planning help, expert tax advise and some experienced real estate and investment insight.

Maybe it is a good time for you to buy a home. Maybe it isn't.

But current market conditions do indicate it is a good time to decide.

 For more questions please feel free to email me at Info@eNOVAHomes.com or call me at 703-625-4949.