A:

Q: We do have first time homebuyer money. It is dependent upon on your income. You do not necessarily have to be a first time homebuyer, depending on the area you’re in. If you’re in what they call a “targeted area,” you do not have to be a first-time homebuyer. Targeted areas are primarily the suburban areas of the city.

However, for the very suburban areas, there is another type of loan available that is 100% financing.  It’s through the USDA and its called the rule home loan, and with the rule home loan you do not have to  be a first-time homebuyer, however you do need to have minimal income.

The more people in the family, the larger down payment assistance is available. Your interest rate is fixed  over a  33-year loan versus a 30-year loan, again based on your income. It can be as low as 2 or 3 ½ percent. That will not change, but you will have to submit  to the home loan authority or USDA periodically. They’ll ask you for income tax returns to substantiate that you’re still at that lower income level.

That’s probably one of the most frequent questions we’re asked. But state bond money is generally available. They seem to come up with bond twice a year. It is first come, first serve. It does run out. So if it does run out, you need to be with a REALTOR® who is aware of when that bond is coming out. You need to get your name on the list and get in and get it done pretty quickly.

Cindy Cheatwood is a broker associate with Cleaton & Associates in Piedmont, OK.

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Q: How do I make a competitive bid as a first time home buyer?
~ Mary

A: There are three tips I have for you. The first is knowing your statistics. I would have my Realtor pull a list of sales price ratio report that would let me know what sellers are expecting to get in that zip code you’re looking in for their price. So, for example, say sellers are getting 97 percent of list price, you would certainly want to try to keep your offer within that realm.

The second part would be the terms. When I say terms, I’m talking about do you need closing costs? Is there a certain closing date you need? Sometimes if you can close a little bit quicker it’s more attractive to a seller, so sometimes you can offer a little bit lower on price. Or, if you have the closing costs in place, then perhaps you can give them a lower number because you’re paying your own closing costs.

The third aspect of it would be you, and how ready you are to buy a home. If you’ve gone through your pre-counseling, if you’ve had your mortgage approval done, in place, that’s going to make you a very attractive buyer.

So look at price and statistics. I would look at the actual terms of the contract, and then how ready you are as a buyer. That would be my answer to your question. Good luck in finding your new home.

Brian Copeland is a Nashville, TN-based REALTOR® who is a featured agent on TLC’s “Flip That House” and HGTV’s “House Hunters.”

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Even though the first time homebuyers tax credit program is officially over, that doesn’t mean that people have stopped looking for new homes. In fact, many Realtors are saying they are busier than ever.

We asked some of our “Ask a REALTOR®” experts to share some of the questions they hear most from new buyers and the answers they provide.

“How much money do I need to purchase a home?” In today’s market you need at least 3.5% of the purchase price; this is using FHA financing. Then you may need an additional $1,500 to $2,500 for closing costs. However, often we can ask for the seller to pay for closing costs or at least some of it.

“What will a typical bid on a home be?” This is where the use of a Realtor is key. I will go into the system and find ‘like’ houses that have sold in the last six months to determine the fairness of the asking price. I will call the other agent to determine the motivation of the seller. If it is fairly priced and the motivation is moderate, you can expect to pay about 95% of the list price.

“Can I get that house on this lot?” I absolutely love this question; I get it all the time! Buying a home always has compromises in terms of wants, needs and pricing. It is rare to find everything exactly as you want, but we can oftentimes come very close.

Cindy Marchant is a Broker/Realtor with Keller Williams in Fishers, IN.

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I am closing on a house and I should gross 110k for 2009. I have lived in two separate homes deeded to me and my ex (I believe the mortgage on the second home was in his name only) for the consecutive years of 2000-2005. Do I qualify for any of the tax credit?

Congratulations on the new home first of all, that is fantastic news.

The tax credit has been both extended and expanded. According to the new tax credit limits, single household income limits have been raised from $75,000 to $125,000 and joint filers from $150,000 to $225,000, so your income would not be an issue. Additionally, homes with purchase prices up to $800,000 are eligible for this tax credit, so this would also encompass your new home.

My only concern would be the residency issue of your previous homes. You mention living in two residences for the years 2000 to 2005, one of which you believe is in your ex’s name. In order for you to qualify for the tax credit of $6,500 now being offered to homeowners who are not first-time purchasers, you must have lived in the same principal residence consecutively for 5 of the previous 8 years. If that is the case, you can count on Uncle Sam for a $6,500 credit.

Hope this is helpful and best wishes in your new home Marie!

Christina Rordam is a REALTOR® for Exit Realty Central in Orlando and Baldwin Park, FL.

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With the economy the way it has been in the past year, banks are less likely to give loans than they were previously, although the market is better now for buyers. Will buyers with less than perfect credit have opportunities to refinance their debt and be considered eligible for a home loan for first-time buyers?

The last thing we want to do is to allow people to buy a home just because it sounds good on the  news. The reason we are in the mess is in large part because our Congress decided it didn’t matter what someone’s credit was, as long as they were breathing, they should and could own a home. We see where that got us.

As a country and as individuals, we need to take responsibility for our actions. That means, we need to be as certain as possible that we can afford a home before we buy it. We can’t blame everyone else when we should never have applied for a home loan in the first place. So while I agree that banks have gone too far in the other direction, we have to use common sense and not approve people just because it’s the nice, politically correct thing to do.

No matter your age, race, religion or any other description you care to use, if you can’t demonstrate a strong ability to afford your mortgage and the other expenses associated with home ownership, if you don’t have a history of paying your bills on time and of not getting into too much debt versus your annual income, then you should not be buying a house. The American Dream may have and may still be home ownership, but that doesn’t mean it’s an American right. Earn what you have rather than being given what you have. You’ll be better for it and so will the economy.

Tim McBrayer is a licensed Realtor in the Triangle specializing in North Raleigh, North Carolina Real Estate. He is an Eco Broker and serves on the Green Builders of the Triangle education committee.

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Is there a scenario in which a first-time home buyer would prefer an adjustable rate mortgage over a standard or FHA loan?

The simple, short answer is yes.  In my mind, ARMs are a wonderful cash flow tool to utilize in today’s world especially when homes are appreciating in value.

If, you, the buyer:

1) Can afford a normal 15 or 30-year fixed rate loan and plan accordingly

2) Have a way to invest that extra cash flow to be saved on a monthly basis  into something that will give you a better return on your money than tying it up in your home

3) Believe that liquidity is important, for whatever reason

4) Know that you can not just go and spend that extra, saved money without it coming back to roost in the long haul

Then, I think there is an argument to be made fo the fact that an ARM still might make sense for you. But don’t look at it as if it is free money because your required monthly payment is less. You could end up in the same unfortunate situation that played a large role in creating today’s environment.

Dave Congdon is a Broker Associate Islands International Realty in the Brevard County, FL area.

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To recap the top stories in real estate during 2009, we reached out to our  friends in the blogosphere and in the media. Not surprisingly, respondents agree with David Kres of Buyers Brokers Only, LLC who says, “2009 will go down in history as the year of the first-time homebuyer.” Supported by the tax credit and low interest rates, first-time buyers had an unprecedented showing in 2009 and helped to boost the struggling economy with their aggressive approach to the market.

Although first-time buyers were this year’s big stars, the drama surrounding  foreclosures and short sales almost stole the show. Mary Shanklin of the Orlando Sentinel and Martin Wolk of MSNBC agree that foreclosures, and the problems created by them, were among the most important stories of 2009. Coined “toxic assets” these homes were either sitting vacant or creating a flurry of paperwork as first-time buyers and investors competed to find the deal of a lifetime. Due to defaulting loans,  foreclosures in 2009 helped cause the financial collapse, but by year’s end had become the most sought after properties. 

The rush to buy was due to a miraculous combination of factors. Interest rates continued to stay low, setting records as they fell against speculation. Low priced foreclosures and the high inventory of homes on the market brought prices down to, dare I say, affordable levels. Even the luxury home market saw steep declines as “sellers of luxury homes began driving their prices way down – some with price reductions in the millions,” says Kelli Hart of the OC Register.

Home sales continued to drop throughout the year until the Fed stepped in and passed the $8000 tax credit for first-time homebuyers. Then home sales shot straight up, according to Kay Severinsen from the Chicago Sun Times, to their highest levels in more than two-and-a-half years. REALTORS® Sonya Loose and Timothy McBrayer along with Kristin Schott of the OC Metro, all agree that the tax credit is one of the most important stories of 2009.

The impact all of these significant events will have on 2010 has yet to be seen. “The big unknown for 2010 is whether all the private and public efforts to strengthen the market can be sustained in the face of what will probably be rising interest rates,” says Les Christie of CNNMoney.com. With the tax credit extended and expanded, the hope is that 2009’s momentum will carry into next year and the real estate market can continue to aid in our country’s economic recovery.

-Naj Alikhan, Social Media Moderator, REALTOR.com®

The home buyer tax credit- which originally only applied to first time home buyers who had until the end of November to take advantage of the $8,000 tax credit- was recently extended to April 30, 2010 and expanded to include buyers who have already been homeowners.

While first time homebuyers who are purchasing a home- new or resale- are still eligible for the $8,000 tax credit, homeowners who have lived in their current home for at least five consecutive years within the last eight, and who want to purchase a different home, qualify for a different $6,500 tax credit.

To qualify for the $8,000 tax credit, first time home buyers must purchase a home on or after January 1, 2009 and on or before April 30, 2010. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner. A limited exception exists for certain contract for deed purchases and installment sale purchases. See the IRS website for more detail. The law also allows home sales occurring by June 30, 2010 to qualify, provided they are due to a binding sales contract in force on or before April 30, 2010. The purchaser has until June 30, 2010 to close.

To qualify for the $6,500 tax credit, homeowners who are purchasing a new home must do so between November 7, 2009 and April 30, 2010, and they have until June 30, 2010 to close.

There are income limits for claiming the tax credit which are as follows: 

For sales occurring  after November 6, 2009, the income limit for single taxpayers is $125,000; the limit is $225,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $125,000 for single taxpayers and $225,000 for married taxpayers filing a joint return. The phase-out range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $145,000 (single) or $245,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.

For more information on the home buyer tax credit, visit FAQ: Am I Eligible for the Tax Credit?, posted on Move.com’s Home Finance section.

According to a national survey commissioned by Move.com, one in six (15.4 percent) home buyers are considering saving up to buy a new home within the coming year. We asked the Ask a REALTOR® team to give us more insight into what these buyers can expect in 2010.

What extreme measures should a buyer be willing to take in order to buy a home in 2010?

Lora Davis: “Buyers, in many cases, will still be looking at short sales and bank owned REOs as the best values in 2010. Being willing to put in a little “sweat” after closing will get them the best buys. Many bank-owned and short sale homes need cleaning and refurbishing. Looking beyond the surface to potential will reap rewards in the long run.”

Steve Jackson: “The only ‘extreme’ measures that I would counsel my buyer clients to use in 2010 would be using ‘extreme’ caution…not to get caught up in the rush to buy ’something/anything’ just to get in under the tax credit deadline. I am of the opinion that the buyer must have clear and realistic goals regarding why they are buying, why they are buying NOW, what they are buying, how they are buying, and the list goes on.”

Michael Bunch: “Buyers need to seriously consider taking a manageable loss on the sale of their home to unload it so they can move up and work the percentage decreases in value to their benefit. Also, they might be able to get into a neighborhood that was out of their price point and probably soon will be again.

15.7% of buyers are looking for investment properties. What advice do you have for these buyers?

Sheri Moritz: “I work with a large number of investors in our market and have found the most valuable thing that most lack is knowledge and reality. I have yet to come across a new investor that tries to flip a house to find that it was much more than they thought they were going to be getting into. This is not a ‘learn-as-you-go-along’ type of venture, unless you have an extremely unlimited amount of money. Do as much research as possible and have contractors that you can trust who will give you realistic estimates of what repairs will cost and how long it will take to complete them. Then add about 20 percent  in dollars and 40 percent more in time.”

 
Deb Madey: “Investors need to clearly study and define their objectives. Once they have clearly identified the target criteria, an investor needs to identify, act, and move forward or away from possible properties quickly. If a property fails the criteria, move on. If it meets the criteria, do not agonize over insignificant personal perks a property lacks. A first-time homebuyer purchasing their primary home can and should focus on the details that make a house a home. Perceptive investors know their targets, make offers and walk away at pre-determined thresholds.”

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In most markets, factors like price declines and high inventories have given buyers the upper hand. Now that the tax credit has been expanded to move-up buyers, there are even more buyers competing for desirable properties. First-time buyers can take their time finding the right home, but move-up buyers face a balancing act when buying a new home while simultaneously selling their existing one.

Anthony Licciardello blogs about moving-up and selling at the same time:

“Here is what usually happens: Many folks will look at homes for months until they find the home they like, make an offer, and if the homeowners accept it,  decide it’s time to sell.  Usually, that requires getting the absolute highest price for their house in less than 2 weeks.

The reality of this sale coming together are about the same as a herd of buffalo charging down the street, in a hail storm, between the hours of 5 and 7 pm, on the second Tuesday of the month, on an even numbered calendar day. While some might call this a sale on contingency, I wouldn’t. This is a sale on absolute luck.”

Licciardello continues his post with a list of questions that every move-up buyer should ask themselves. Banking on the sale of your current home to help pay for your new home can really put a strain on your timeline. Licciardello recommends using a qualified REALTOR® and an attorney to help you balance these complicated transactions

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