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 | Josephine Middleton, ABR, CRS, ePRO, GRI, RECS Broker Associate RE/MAX Augusta (706) 855-7653 Ext. 4702  |  |
Augusta, GA 30907
Experts would say yes, if you meet the following criteria: -- Are not counting on price appreciation in the short term. Most experts don't expect home prices to inflate much in the next couple of years. -- Can afford the monthly payments. Plan to stay in the house long enough for the appreciation to cover your transaction costs. The costs of buying and selling a home include real estate commissions, lender fees and closing costs that can amount to more than 10% of the sales price Need a tax break. The mortgage interest deduction can make homeownership very appealing. Prefer to be an owner rather than a renter. Can handle the maintenance expenses and headaches. Are not greatly concerned by dips in home values. How do I Figure what I can afford to buy? Roughly, it's three times your annual income. Real estate experts strongly recommend people get prequalified by a lender as a way of calculating exactly how much of a home they can afford. When qualifying people for a loan, lenders look at a borrower's full financial standing. Lenders use the relationship P1TI, or principal, interest. taxes and insurance payments, and their ,gross monthly income. Generally. lenders like to see the PITI not exceed 30% to 33% of the borrower's ,gross monthly income. They also consider the ratio of the borrower's monthly debt payments, including the PITI to income. Some lenders have flexibility in these qualifying ratios. What is considered a low down payment? Anything less than the standard 20%. However, many people borrow with less than 20% down by obtaining private mortgage insurance (PMI). And numerous programs are available to help first time buyers with little or no down payment, including Federal Housing Administration (FHA), Veterans Administration (VA) and Federal National Mortgage Assn's (Fannie Mae) Community Home Buyers Program. How much does PMI cost? "PMI costs vary from one mortgage insurance firm to another, but premiums usually run about 0.5% of the loan amount for the first year of the loan. Most PMI premiums are a bit lower for subsequent years. The first year's mortgage insurance premium is usually paid in advance at the close of escrow, and there is usually a separate PMI approval process," writes Diana Hymer, author of "Buying and Selling a Home in California. A Complete Guide," (Chronicle Books). How much should I set aside for maintenance expenses? According to Bob Vilas, author of "Guide to Buying Your Dream House," (Little, Brown & Co.): "For maintenance, depending on the age and condition of the house. you should allocate about 1% of the purchase price annually. " Is it better to make as large a down payment as possible? Putting down as little as possible and taking a larger mortgage allows buyers to take full advantage of the tax benefits of homeownership. Mortgage interest (and property taxes) are fully deductible from state and federal income taxes. Can I buy a house with nothing down? Although some experts advise against it, home buyers interested in buying a house with nothing down can do so. But it's not easy finding these loans and in some cases they can be risky. Occasionally, a builder will offer nothing-down loans to induce sales in an otherwise slow-moving project. Desperate sellers also may agree to finance the full purchase price to get out from under a property. The VA loan program allows buyers-s to qualify for a nothing-down loan. What programs does the FHA offer? The U. S. Department of Housing and Urban Development (MUD) offers a variety of loan insurance programs through FHA that require about 4% to 5% cash down. The down payment must be the buyer's own money- gift money is not allowed but buyers can finance all non-recurring closing costs. FHA loans are originated and serviced by private lenders. What special programs exist for veterans? VA loans are attractive because in some cases they require no down payment. With the U. S. department of Veterans Affairs, there is no restrictions on the purchase price. For more information, call your local U. S. Department of Veterans Affairs office. Can people who served in the National Guard use the VA loan program? Yes, but the qualifying requirements may be more stringent and loan fees for National Guard veterans are generally more costly. How does the Community Home Buyers Program work? The program is sponsored by Fannie Mae, the Federal National Mortgage Assn., and administered through participating lenders. The program has an income cap of 115% of the area's median income. In addition, the borrower must attend a seminar on homeowner;hip and the home-buying process. The program allows for 95% financing. The borrower may pur down as little as 3% of his or her own money, with the remaining 2% coming in the form of a family gift or loan from a government or nonprofit t agency. For a list of participating lenders, call Fannie Mae at (800) 732-6643. What are the standard contingencies in a purchase offer? According to author Diana Hymen, "Most real estate purchase contracts include at least two contingencies A financing contingency makes the purchase conditional on the buyers' ability to obtain a loan commitment from a lender. An inspection contingency allows the buyers to have professionals Inspect the property to their satisfaction, Can I get a home loan with bad credit? A poor credit history makes it harder to qualify for a mortgage. There are numerous types of credit report problems that cause a lender to reject a loan application, says Ilyce R. Glink in "100 Questions Every First-Time Home Buyer Should Ask," (Random House): "If you've ever missed a credit card payment, or defaulted on a prior mortgage or school or car loan, it will probably show up on your credit report. If you've filed for bankruptcy within the past seven years, that will show up on your credit report. If you haven't paid your taxes, or there has been a judgment filed against you (perhaps for non-payment of spousal or child support), it will also show up. Failure to pay your landlord, doctor or hospital may turn into a black spot on your credit report," How can I find out what my credit report says about me? Anyone concerned about their credit history can order a copy of their own report by calling the three main national credit reporting agencies: Equifax (800) 685-1111; TRW (800)392-1122 or Trans Union (317) 408-1050. |
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| Josephine Middleton, ABR, CRS, ePRO, GRI, RECS Broker Associate RE/MAX Augusta (706) 855-7653 Ext. 4702 | |