You’re looking to purchase your First Home, that’s very exciting — and perhaps a bit overwhelming — given the expense involved and the number of steps it takes to become a homeowner today. As a First Time Home Buyer, you’ll certainly face many decisions along the way, and there’s plenty to do before you achieve your goal.

As your Ventura County Realtor resource I wanted to share some of the most ask questions that First Time Home Buyers have while looking or before they search for a home.

Timing seems to be critical when buying a home. Should I wait to see if home prices might get lower?
It is difficult to time any real estate market, as soon as prices drop, there is more competition from other buyers, which can result in bidding wars. There may never be a better time to buy a home than right now – if you are ready.

Keep in mind that interest rates and home prices tend to move in opposite directions. And interest rates today are very affordable. Should prices in the area you are considering drop some, chances are interest rates will be higher by then – and you could end up paying as much or even more for the home you want.

History shows that low interest rates increase demand for homes. As the economy gets back on its feet and demand for homes increases, sellers will to start raising their prices — in fact, price increases are already being seen in some areas. Not buying your first home today could be a big mistake — again, if you are financially ready to buy.

Do you have a steady income? You will need money for a down payment along with cash for closing and basic move-in expenses.
Once you buy, will you have enough money each month to spend on routine maintenance or major repair work if necessary? Be sure to maintain a reserve for emergencies.

Do you plan to live in the home long enough to build some equity? Buying for the short-term is much riskier than taking a longer resale horizon. Depending on the area’s housing market, you’ll want to build equity through principal payments and through appreciation to cover selling expenses. The odds will be in your favor if you’re buying for the long term.

Call us to find a great deal in your first home today. You may be surprised to find out how much you can afford to buy!

How can I tell what a home is really worth?
The listing price of a home is just a starting point. Depending on the seller it may – or may not – reflect the true value of the home in today’s market. That’s why you need experts like us working on your side.

To determine the market value of a home, We will look at what similar homes sold for and what the general environment of the real estate market is when you are ready to buy, below are some of the factors that will determine what you should offer:

Recent sales prices of comparable homes in the neighborhood or area. Usually true “comps” are within a half-mile to a one-mile radius of a home, although search parameters may be extended if we cannot find similar properties nearby. Such may be the case, for instance, if the home is much older than other homes in the neighborhood or in a rural area. Neighborhood boundaries and features such as bodies of water, golf courses, parks, wooded areas, major thoroughfares, transmission towers and transit systems, and view (or lack thereof) also can come into play. We also analyze pending sales and active listings to understand the most current pricing trends in the area.

Features including number of rooms, size, quality of construction, architectural style and age. Other amenities can also make a difference, such as garage space or street parking, if applicable. Lot size (corner lot, cul-de-sac lot, acreage), type of construction (brick, concrete block, stucco), fireplaces, storage, outbuildings, etc. are other features we compare. For condos and co-op floor plans, location in building, views, natural light, convenience getting in and out, access to amenities, parking spaces per unit and other features can raise or lower the value of a property.

How long the home has been on the market. The longer the home has been up for sale, the more likely it will sell at a lower price than otherwise comparable homes.

Demand for and supply of area homes for sale – including those in some stage of foreclosure. Strong demand for and short supply of homes in the same area will make most sellers less flexible. Of course, when conditions are reversed, with low demand and high supply, you’re likely to have more room to maneuver on price and terms. It’s all about the sales trends in the area — which we track constantly.

Physical condition. For obvious reasons, properties that are in good shape sell for more. Those that need major repairs, updating or improvements come cheaper.

We consider all the above factors and more when we run a Comparative Market Analysis (CMA) to advise our clients about the value of a particular home on the market. We’ll be happy to advise you when you’re ready to make an offer on your first home.

What are the most important things to consider when buying a home?
While many important details must be considered in choosing your first home – location, style, size, price — one thing is certain: if you will be moving again in a few years, be sure you buy with selling in mind. Chances are, the items that make your new home a comfortable fit for you will also attract buyers later on.

Here are some special considerations for the First Time Home Buyer who has resale in mind:

Check out location. Consider what is near the property (good and bad), how it is situated and the availability of all aspects of transportation, even those you may not use.

Watch for growth potential. Look for an established neighborhood that will be enhanced by future growth but not inconvenienced by it.

Look out for resale value. Seek a prime neighborhood where homes sell well in any market. Remember, it’s smarter to buy a lesser home in the best neighborhood than a better home in a less-desired location.

Research area schools. Check for quality public and private schools, whether or not you have school-age children.

Go for the green. Look carefully at the lot for trees and greenery to buffer winter winds or summer heat. And pay attention to energy-conservation elements including appliances, doors, heating/cooling systems, etc.

Make room for visitors: See if ample guest parking is available for you and your neighbors.

Ponder privacy issues: Consider how much privacy the home and lot provide.

Drive the commute before you buy: Check morning and evening drive times to work, schools, shopping, churches.

What can a real estate agent do for me that I can’t do for myself?

The process of buying your first home can be overwhelming. As professionals who specialize in real estate, we are with you every step of the way. We can help you navigate the home-shopping maze with a variety of services:

Financing. We can help you evaluate your financial circumstances, help you decide how much home you can afford and help you select the best financing plan.

Housing needs analysis: We can help you sort out housing priorities, the expenses involved in buying a particular home and what steps to take to reach your goal.

Home search. We can show you what properties are on the market in your price range and take you on a guided tour of the homes you’re interested in.

Contract. We can make sure you understand the terms and conditions of a contract when you are ready to make an offer on a home.

Loan application. We can help you select the best financing option, help you choose the lender with the best rates and service record and help you prepare your mortgage application.

Inspection and Closing. We will assist you in a pre-settlement/closing inspection to be sure the terms of the purchase contract are kept, and we’ll follow through to all the way to settlement.

Call us now or send an e-mail to take advantage of our years of experience helping people find the home they want and can afford. We’d love to help you, too!

Who do real estate agents really work for – the buyer or seller?
Many beginning home buyers are confused about who real estate agents represent. Don’t worry, they’re not trying to disguise themselves. Here is a quick look at the various types of agency:

Seller agency. The most traditional situation is one in which the seller is represented by both the real estate company that lists the home for sale as well as the real estate company that brings in the buyer (unless the buyer has a buyer’s agent). In this arrangement, the seller pays the commission to his or her broker and agent, who then shares that commission with the broker and agent that brings the buyer to the table.

Buyer agency. This is more recent trend in real estate. Just as a written Listing Agreement is required for a broker (and broker’s agents) to represent a seller, a written Buyer Agency Agreement is required for an agent to represent a buyer. Under that written agreement, the agent works exclusively for the buyer’s interest, representing the buyer with confidentiality and loyalty and sharing any available material information with the buyer. In most cases, seller still pays a commission to the buyer’s agent, but some other arrangements are also possible.

Disclosed dual agency. In this case, an agent helps both the buyer and the seller. There must be informed consent of both the buyer and seller, using a written agreement with the involved broker(s). Special conditions apply regarding disclosures to both parties, including limitations on an agent’s ability to represent either buyer or seller fully or exclusively.

What advice can you give me about buying a new-construction home?

Buying a new home built to your specifications can be exciting — and a bit daunting for first-time homeowners. If you are good at visualizing plans and you’re willing to live with a few months or more of inconveniences (construction traffic, debris, mud, dust and unfinished roads) you can end up with a home that exactly meets your taste and budget. Buying a new home allows you to select a particular lot as well as colors, flooring, bath amenities, appliances, countertops, cabinets and much more.

But there are a few pitfalls that can make a home hard to resell when that time comes. Here are some keys to a smart decision:

Look at the location. One way to compare the value of various locations is to see how national builders price the same home in different nearby suburbs; there may be thousands of dollars of price difference for homes a few miles apart. Also, check how quickly existing homes resell in the neighborhood, and whether the sellers realize a profit or loss.

See what they’re selling. Check if the builder has a model on site of the style and price home you want, or if a model is available at another nearby subdivision. Look for things that may not be noticeable on plans like narrow or steep stairs, poor workmanship, awkward placement of doors, etc. Also, try to see a nearly completed home to judge how the home will look with less finish and fewer upgrades than the model has.

Stick to the facts. Bring a scale floor-plan of your current home with you, and be sure to include room measurements on the plan. Also, bring floor plans of any other homes you especially liked so you can have something concrete to compare.
Add up the options. Putting in too many options may price your home out of the market, but too few may make it difficult to resell. Hardwood floors on the main level, a fireplace in the family room, rear deck and walkout basement are important options in many areas. Consider adding those popular options that would be much more expense to add after the home is finished.

Check it out. Hire a home inspector to check the home during construction as well as before closing. And consider having an experienced real estate attorney read the purchase contract before you sign it.

I’ve found a home I want, but it needs repairs and upgrades. Can I borrow money for both the mortgage and improvements?
You love the home, but it needs work, and all your cash is going toward the down payment and closing costs. Now, with a special government program, you can apply for a buy-and-repair loan to borrow enough to fix up the property as well as buy it. The Federal Housing Administration’s (FHA) 203(k) loan rolls the cost of qualified repairs into the mortgage.

Under this program, first-time buyers who qualify can purchase a fixer-upper with a very low down payment. And recent changes in the program make it more user friendly, including a reduction in mortgage insurance costs and streamlining the approval requirements. Actually, two programs are available:

The “Streamline (K)” Limited Repair Program permits home buyers to finance an additional $35,000 into their mortgage to improve or upgrade their home before move-in. With this product, homebuyers can quickly and easily tap into cash to pay for property repairs or improvements, such as those identified by a home inspector or FHA appraiser.

FHA’s 203(k) Mortgage is the Department of Housing and Urban Development’s (HUD) primary program for the rehabilitation and repair of single-family properties. In this case, a portion of the loan proceeds is used to pay the seller, and the remaining funds are placed in an escrow account and released as rehabilitation is completed. The cost of the rehabilitation must be at least $5,000, but the total value of the property must still fall within the FHA mortgage limit for the area (as us).
Qualified repairs include re-roofing, replacing windows, replacing a water heater or furnace, energy improvements, landscaping and providing handicapped access, among others. Find out more about how to qualify for these programs at: HUD

Got any tips about how to pick the right mortgage?

Shopping for a mortgage loan is a little like shopping for a new coat — you need one that fits your lifestyle as well as your budget. Many different mortgage products are available today, and each suits a different set of circumstances. Match mortgage terms to your lifestyle. For example:

If you expect to stay less than three years in a starter home, a one-year Adjustable Rate Mortgage (ARM) might make the most sense with its low initial rate and a cap on annual increases. Be sure, however, that you would not be liable for a prepayment penalty should you decide to sell in three years.

Planning to stay longer? A 5- or 7- or 10-year ARM loan may provide a low initial rate for a few years with a potentially significant one-time jump at adjustment time if interest rates have risen. Sometimes, however, rates on these loans are not much lower than those on Fixed Rate Mortgages, so it pays to shop around.

If you plan to stay in the home indefinitely, it may be best to opt for a traditional 30-year fixed-rate loan — or 15- or 20-year fixed loan if you can meet the higher payments — and pay extra points to get a lower interest rate.

To decide which to choose, figure all the costs over the time you expect to be in the home and compare the bottom line. Also compare the monthly payments at each step to be sure they are manageable. Keep in mind the maximum allowable increases (as defined by loan “caps”) when calculating future payments under a worst-case scenario.

We’ll be happy to help you run the numbers to make comparisons. We can also give you a list of mortgage providers — who have served our clients well in the past — so you can do some comparison shopping for different types of loans from different lenders.

We’re a little tight on cash (even after help from the folks!). How can we reduce our out-of-pocket closing costs?
You’re not alone! Many first-time buyers have the income but struggle assembling cash to purchase a home. Here are a few ideas that can help:

Schedule late-month settlement/closing. Since interest on the loan is paid to the end of the month at the settlement, the interest payment gets lower as you get closer to the end of the month.

Skip late-month settlement. Another approach is to wait a few more days to go to settlement/closing at the beginning of the month. That way, you’ll need to pay more up front at settlement, but you’ll gain a whole month’s delay before the first full mortgage payment is due, because mortgage interest is paid in arrears, after the month has passed.
Reduce out-of-pocket cash. Another way to reduce the cash needed at settlement takes some advance planning. By negotiating with the seller, you may be able to pay more for the home (and take a larger mortgage), while the seller puts an equal amount toward out-of-pocket settlement costs. Be sure the home will appraise for the higher purchase price you negotiate. Also, your lender may limit the amount of seller contribution.

Finance closing costs. A fourth option is to find a lender who will finance closing costs by wrapping them into the mortgage. This method may, however, cost more over the long run, as lenders often will then charge a higher interest rate for a “no closing costs” loan.

What is Private Mortgage Insurance and will I have to buy it?
Private mortgage insurance is required by most lenders when the borrower’s down payment is less than 20% of the purchase price. The insurance protects the lender against default on the mortgage.

You may be able to reduce the cost, even if you can’t entirely avoid the expense of mortgage insurance, by asking for lender-paid insurance. Although most lenders don’t advertise the fact, some will pay the mortgage insurance premiums in exchange for a slightly higher interest rate on the loan. This makes the insurance cost a tax deduction for you because it has become an interest expense instead of a non-deductible insurance premium. Ask your lender for help.

But, since the higher interest rate stays in place for the duration of the loan, this plan is best for homeowners who plan to move by the time their equity reaches 20%, when the insurance typically would have been discontinued. If you plan to own the home for a long time, paying the insurance premiums yourself may be a better deal. Ask your lender for details.

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