So I'm sure all of you have heard about the First Time Home Buyer tax credit that is out there for 2009 first time home buyers. And if not, well listen up!
So here it is.....all you want to know about the first time home buyer tax credit...
Now don't get too excited you can't just sign for a new home and "bang" you have $8,000 given to you, it just doesn't work that way. Instead the The American Recovery and Reinvestment Act of 2009 allows a tax credit for your 2009 tax year to be applied of up to $8,000.00 for qualified first time home buyers purchasing a principal residence in the dates between January 1st 2009 and December 1st 2009.
Bellow is a set of some questions and answers that are very common around the first time home buyer credit. Now, before I go into them remember I am not a tax advisor and you should always consult one with questions. (do you like my little disclaimer?)
1. Who is able to receive the tax credit?
First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and before December 1, 2009. 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
2. How do you define first time home buyer?
The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.
3. How do you determin how much you are getting?
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
4. What type of income limits, if any, are there?
The income limit for single taxpayers is $75,000; the limit is $150,000 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 $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The phaseout 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 $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.
5. What if my MAGI is above the limit, do I qualify for any of the tax credit?
It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose MAGI exceeds the phaseout limits. (talk to a tax advisor)
6. How do I claim the tax credit? Do I need to complete a form or application?
Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on line 67 of the 1040 income tax form for 2009 returns (line 69 of the 1040 income tax form for 2008 returns). No other applications or forms are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests. Note that you cannot claim the credit on Form 5405 for an intended purchase for some future date; it must be a completed purchase.
7. What types of homes qualify for the tax credit?
Any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences. (please note that you cannot purchase a home from a relative, talk to a tax advisor)
8. Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
Yes. The tax credit can be combined with the MRB home buyer program. Note that first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in an MRB program.
9. If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
Yes. The law allows taxpayers to choose ("elect") to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.Taxpayers buying a home who wish to claim it on their 2008 tax return, but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit. You should consult with a tax professional to determine how to arrange this.
10. For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?
Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.
*Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine "adjusted gross income" or AGI. AGI is total income for a year minus certain deductions (known as "adjustments" or "above-the-line deductions"), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.To determine modified adjusted gross income (MAGI), add to AGI certain amounts of foreign-earned income. See IRS Form 5405 for more details.
Are you still awake? That is a lot of information to take in. The easiest way to explain the tax credit is.......if you don't own a home and haven't for 3 years, buy one now so you can get up to the $8,000 amount deducted from how much you owe in 2009 or if nothing owed you get a check back for that amount!
To apply for a loan visit My web page.
Custom Search
Thursday, July 30, 2009
Monday, July 27, 2009
First Time Home Buyers - Step 8
Let's take a few min's to recap what we have done so far.
You found out how much you made, how much you spent in bills, how much you could afford your mortgage payments to be, how much your loan could be, what amount of a purchase price you could afford, and how much you needed/have for a down payment. Then we went about finding a Realtor that worked well for you and got you pre-approved for a loan.....WOW! What a great educational day this has been.
Now we are at a fun part of the process....you shouldn't have to do much except wait after you have completed step 8. First things first, you need to take the accepted purchase and sale agreement (meaning you and the sellers have agreed and signed your offer to make it official) to your lender. Then you need to ask to see all the conditions that you are required to do in order for the loan to get compelted.
Conditions are set upon the underwriter/bank that are requirements in order for a loan to be signed and funded(meaning the money actually goes out to where it's suposed to). Some conditions that are very normal on a purchase are as follows:
Verify the property value matches the purchase price but is not less then the purchase price
Verify borrowers income: Obtain a copy of the most recent 30 days pay stubs, 2 years tax returs, and W2's.
Verify assets to close: Obtain a copy of your most current 2 month bank statements
Verify employment: VOE (which means verification of employment - this can usually be done over the phone
Complete Copy of Home Owners Insurance - you need to provide the lender with the agent name, company name, and phone number of whoever you are going to use for insurance
These are just a few of the basic conditions that lenders will have on your loan. You can request a copy of these for your records and ask to be informed of when these conditions come in.
Next, after you have given your lender the purchase and sale agreement and found out what conditions you need to meet go and collect all the information requested and provide it to your lender within 24 to 48 hours, the quicker you give it to them the qicker you will find out if anything else is needed.
Once you have done this you should also schedule an inspection with your Realtor. The inspection will allow for a license Home Inspector to come out to your home and make sure that everything is sound and up to current standards. This can also save your butt! When you get an inspection you will be sure that you are buying a good home, and if for some reason the inspector finds that there is something wrong with your home you can provide a copy of the inspection to the sellers and either request for them to fix the problem or tell them you want to negotiate the price, or worst case cancel that purchase. If you cancel due to an inspection you usually are in the clear because your Realtor would have put in your offer that if the inspection came back with problems you could re-negotiate your offer or back out.
So what if you are buying a new home? Do you need an inspection? In my opinion, YES! Even new homes have problems. We are all humans and we all make mistakes. Wouldn't you feel better to know that you are buying a sound home that has no constructural or electrical mistakes? Now keep in mind you are not required to do an inspection but it is recomended.
Once you are done with the inspection and you have given all of your conditions to the lender now is the time for you to sit back and wait for the proccess to be done. Now a lot of my buyers will call me regularly to get updates and that is perfectly fine, others will just sit back and wait for me to tell them things are done. It is all up to what kind of person you are and how informed you want to be.
Congratulations you are almost done with buying your first home, and you have finished Step 8!! :-)
To apply for a loan visit My web page.
You found out how much you made, how much you spent in bills, how much you could afford your mortgage payments to be, how much your loan could be, what amount of a purchase price you could afford, and how much you needed/have for a down payment. Then we went about finding a Realtor that worked well for you and got you pre-approved for a loan.....WOW! What a great educational day this has been.
Now we are at a fun part of the process....you shouldn't have to do much except wait after you have completed step 8. First things first, you need to take the accepted purchase and sale agreement (meaning you and the sellers have agreed and signed your offer to make it official) to your lender. Then you need to ask to see all the conditions that you are required to do in order for the loan to get compelted.
Conditions are set upon the underwriter/bank that are requirements in order for a loan to be signed and funded(meaning the money actually goes out to where it's suposed to). Some conditions that are very normal on a purchase are as follows:
Verify the property value matches the purchase price but is not less then the purchase price
Verify borrowers income: Obtain a copy of the most recent 30 days pay stubs, 2 years tax returs, and W2's.
Verify assets to close: Obtain a copy of your most current 2 month bank statements
Verify employment: VOE (which means verification of employment - this can usually be done over the phone
Complete Copy of Home Owners Insurance - you need to provide the lender with the agent name, company name, and phone number of whoever you are going to use for insurance
These are just a few of the basic conditions that lenders will have on your loan. You can request a copy of these for your records and ask to be informed of when these conditions come in.
Next, after you have given your lender the purchase and sale agreement and found out what conditions you need to meet go and collect all the information requested and provide it to your lender within 24 to 48 hours, the quicker you give it to them the qicker you will find out if anything else is needed.
Once you have done this you should also schedule an inspection with your Realtor. The inspection will allow for a license Home Inspector to come out to your home and make sure that everything is sound and up to current standards. This can also save your butt! When you get an inspection you will be sure that you are buying a good home, and if for some reason the inspector finds that there is something wrong with your home you can provide a copy of the inspection to the sellers and either request for them to fix the problem or tell them you want to negotiate the price, or worst case cancel that purchase. If you cancel due to an inspection you usually are in the clear because your Realtor would have put in your offer that if the inspection came back with problems you could re-negotiate your offer or back out.
So what if you are buying a new home? Do you need an inspection? In my opinion, YES! Even new homes have problems. We are all humans and we all make mistakes. Wouldn't you feel better to know that you are buying a sound home that has no constructural or electrical mistakes? Now keep in mind you are not required to do an inspection but it is recomended.
Once you are done with the inspection and you have given all of your conditions to the lender now is the time for you to sit back and wait for the proccess to be done. Now a lot of my buyers will call me regularly to get updates and that is perfectly fine, others will just sit back and wait for me to tell them things are done. It is all up to what kind of person you are and how informed you want to be.
Congratulations you are almost done with buying your first home, and you have finished Step 8!! :-)
To apply for a loan visit My web page.
First Time Home Buyers - Step 7
This step is sort of a jumb back from Step 6 but we were on a roll I forgot to go through this step with you first. So here is the part where we talk about some serious stuff....You're Pre-Approval!
Before you even start looking at properties you need to make sure you are pre-approved to buy a home.
What the pre-approval does for you:
1. Tells the Realtor you are working with that you are serious
2. Show's how much you are "pre-approved" to buy
3. Shows the sellers when you make an offer that you already have a bank that says YES you can get a home loan to buy their house
4. Lets you know, and feel good knowing, that you can buy a home based off of your info!
What will your bank need to get you pre-approved?
1. Your information (ss#, DOB, employer info, checking and savings account info, income info, and residence history)
2. Usually they will want to know what price range you are looking at, they will calculate the same figures that you already did so let them know you are a step ahead of the game and show them your numbers!
3. How much down payment you will be putting down
4. What type of Mortgage program you want to go with
5. Term of your loan (15, 20 or 30 year)
If you would like to get started on a pre-approval Click Here My site is through Wells Fargo Home Mortgage and is safe to be used.
Once you have gone through the pre-approval application proccess your lender will give you a letter that says Congratulations you have been pre-approved to buy a house of such and such price! This is the letter that your Realtor and the seller will want to see.
Contratulations you are done with Step 7!
To apply for a loan visit My web page
Before you even start looking at properties you need to make sure you are pre-approved to buy a home.
What the pre-approval does for you:
1. Tells the Realtor you are working with that you are serious
2. Show's how much you are "pre-approved" to buy
3. Shows the sellers when you make an offer that you already have a bank that says YES you can get a home loan to buy their house
4. Lets you know, and feel good knowing, that you can buy a home based off of your info!
What will your bank need to get you pre-approved?
1. Your information (ss#, DOB, employer info, checking and savings account info, income info, and residence history)
2. Usually they will want to know what price range you are looking at, they will calculate the same figures that you already did so let them know you are a step ahead of the game and show them your numbers!
3. How much down payment you will be putting down
4. What type of Mortgage program you want to go with
5. Term of your loan (15, 20 or 30 year)
If you would like to get started on a pre-approval Click Here My site is through Wells Fargo Home Mortgage and is safe to be used.
Once you have gone through the pre-approval application proccess your lender will give you a letter that says Congratulations you have been pre-approved to buy a house of such and such price! This is the letter that your Realtor and the seller will want to see.
Contratulations you are done with Step 7!
To apply for a loan visit My web page
Friday, July 24, 2009
First Time Home Buyers - Step 6
Well you have made it a long way. You have learned a lot about the beginning steps to buying a home. Now it is time to dive a lot deeper.
The first part of Step 6 is to find a realtor that works well for you. There are a lot of different things to consider when finding a realtor. The easiest way to find a successfully one is to drive around and look at all the different listings signs in your local area. The agents with the most signs have the most clients....BUT sometimes that isn't the best person for you.
My husband and I found a realtor through Windermere by the name of Tonya Callies. I sort of stumbled across her. Her husband had come into the bank I was working at during that time and I opened a checking account for him and his wife. Through conversing I found out that she was a realtor and that we had a lot of the same interests. A year later, I called her up and told her I wanted to buy a home.
The process of finding the right home can sometimes take as much time as the process of saving up your money for a down payment....it can take a while to find the perfect home!
Tonya worked with us for 5 months, sending us listings of properties in our price range, taking us around to walk through homes, and talking to us almost every night about our plans. She really held our hand through the entire way! This is what was important to us. We were First Time Home Buyers and we knew nothing about buying! (of course I knew how to do the loans for customers, but I had never been on the purchasing side)
Now some of you might like a realtor that is more blunt, they send you a listing say here is the price tell me if you want to see it....call me when you want to make an offer. They tell you to make the moves, instead of helping you make them. This type of realtor is perfectly fine too! They are actually great Realtors as well because they tend to get things done quick for you.
For a list of Realtors in the Tri-City Washington Area leave a comment I have about 8 top Realtors I work with regularly and after I talk with you a bit I can make a determination which one is best for you!
Once you have found the realtor that you want to use I recommend that you show them your work sheet that we completed in Step 1 and your results from steps 2, 3, and 4. This will help them determine what types of home to look for for you.
Now you might be asking yourself.....Do I really need to use a realtor? YES!
You are a first time home buyer, or even if your not, why would you want to do everything on your own? Realtors do so much more then just "find" you the home of your dreams, they also help you make the offer and make sure that the price is correct. Plus here is the BONUS, if you buy a home that has been listed by any real estate agent, it doesn't have to be with the agent you are using, then the SELLER will have to pay for the realtor service not you! That is right, the seller will pay for all the work that your realtor puts in for you. The reason: Automatically when a listing agent puts a house on the market there is a 6% realtor fee that gets charged when the home sells. If the listing agent is the agent for both the sellers and the buyers then they pocket the 6% fee, if the listing agent is not the agent representing the buyer then the 6% gets split between the two agents. The only time that you would have to pay for a realtor is if you bought a home, while using a realtor, that was for sale by owner or in other words was not put on the market by a real estate company.
So what else does the Realtor do for you? Well once your real estate agents finds you a home they are going to sit down and talk to you about all the details of that home. How much the sale price is, what the estimated appraisal value is, what the property taxes are, and what the neighborhood are like, where the local schools are, and what types of activities are close by. If they do not have the local crime reports I would recommend contacting your local police department and giving them the address to do a crime search, they can also check for sex offenders.
When it's time to make an offer:
Your realtor will write up an offer with you with all the nitty gritty details that are needed, most of which won't make any sense (I know they didn't to me). Once you sign the offer you will also have to come up with an Earnest Money Deposit. This is a deposit that will go towards your final closing amount (down payment + closing costs) but if you choose to walk out of the deal once it has been excepted then the sellers get to keep this money. Call it a good faith deposit, it makes the sellers know you are serious about buying their home. After the money has been collected your realtor will present the offer to the listing agent and the sellers. They will then sit down and decide to do one of three things, accept, decline, or counter. Counter offers are very common. When we made an offer on our home we asked for the seller to pay our closing costs (I'll talk about that in a later step). Because we requested for the closing costs to be included in our payment the sellers decided to give us a counter offer of a higher asking price, they basically increased the offer by 2,000 and said they would pay our closing. We accepted this offer and our final price was 127,160.
Once your offer has been accepted you are on your way to a new home. You need to give your Purchase And Sale Agreement (the document that states the offer and is signed by you and the seller stating that all terms were agreed upon) to your bank and they will start the work.....BUT WAIT!
WE ARE MISSING ONE HUGE STEP!!!!! Your pre-approval! The offer above would never have been accepted without first getting a pre-approval. So....read on to step 7 to find out about the pre-approval.
Congratulations on completing step 6!!!
To apply for a loan visit My web page
Thursday, July 23, 2009
First Time Home Buyers - Step 4
Are you on brain overload yet? I hope not because I'm just getting started! Ok so in step 3 we found out how much of a loan you could afford and, with your desired down payment, how much of a purchase price you can afford. BUT, you can't just rely on how much you want to put down. With lending on a rise there are so many different types of programs that all require different types of down payments. Let's start at the top and work our way down. I am going to share with you just the top few programs and then we will calculate how much of a home based off of each senerio you can buy.
Before I get started I want you to know that I am going talk about down payments a lot. For the sake of easy reading we are going to just find out the purchase prices first and in step 5 we will go over what the down payment and closing costs as well as mortgage payments consist of.
1st despite popular beleif there are programs that allow for 100% financing, this means that you do not have to put any money down! To find out more information about these programs you can visit the following web site at USDA The USDA department, or Rural Financing, is a department that tries to help populate land in areas underpopulated. You can visit their site and search for areas to find out where you can buy homes that can by 100% financed.
If you go with the USDA program what ever your answer was for the loan amount is also the amount of your purchase price, 100%! EASY calculation.
Ok so the next program is FHA. You probably have all heard of FHA but many of you don't really know what it means. FHA is amazing! My home was bought using FHA financing. Generally people with lower amounts of money available for a down payment or lower credit scores will go with the FHA programs. With this program you are only required to put 3.5% down to buy the home, now this can change so make sure you check on the current guidlines with your lender. Also, if you have lower credit scores or credit problems they will allow for approvals with out your interest rate being effected by your low credit score. When I first bought my home my credit score was so bad that I couldn't even get a car loan but when I got my home I was approved for a loan at 5%!!!! This was amazing!
To find out how much of a purchase price you can afford all you need to do is take your loan amount that you calculated in Step 3 and divide it by 96.5% (100% - 3.5%). In my example where the loan amount was 145,454.55 our purchase price would be 150,730.10 (if you got a really amall number then all you did was forgot to push the percentage sign, if that's the case just multiply your answer by 100 and you will get the correct amount).
Now that we've looked at the two special programs let's look at the Conventional side, the easiest way to explain conventional loans is for me to tell you they are the cookie cutter loans. They are usually all the same. They have 5% or more down payment, preferrably higher credit scores, lower debt to income ratios, and they are usually pretty quick loans from begenning to end.
To find out how much of a purchase price you could qualify for you are going to use the same equation as above except change the down payment amount to anything 5% or more. For my example I will use 20% down. For our example of 145,454.55 I am going to divide that number by 80% (100% - 20%) this would give us a purchase price of 181,818.19.
WOW, so let's re-cap what we have learned through the first 4 steps:
1st you found out how much your debit to income was
2nd you found out how much of a mortgage payment you could afford
3rd you found out how much of a loan amount you could afford
4th you found out how much of a purchase price you could afford
Congradulations you have completed Step 4!!!!!
To apply for a loan visit My web page
Before I get started I want you to know that I am going talk about down payments a lot. For the sake of easy reading we are going to just find out the purchase prices first and in step 5 we will go over what the down payment and closing costs as well as mortgage payments consist of.
1st despite popular beleif there are programs that allow for 100% financing, this means that you do not have to put any money down! To find out more information about these programs you can visit the following web site at USDA The USDA department, or Rural Financing, is a department that tries to help populate land in areas underpopulated. You can visit their site and search for areas to find out where you can buy homes that can by 100% financed.
If you go with the USDA program what ever your answer was for the loan amount is also the amount of your purchase price, 100%! EASY calculation.
Ok so the next program is FHA. You probably have all heard of FHA but many of you don't really know what it means. FHA is amazing! My home was bought using FHA financing. Generally people with lower amounts of money available for a down payment or lower credit scores will go with the FHA programs. With this program you are only required to put 3.5% down to buy the home, now this can change so make sure you check on the current guidlines with your lender. Also, if you have lower credit scores or credit problems they will allow for approvals with out your interest rate being effected by your low credit score. When I first bought my home my credit score was so bad that I couldn't even get a car loan but when I got my home I was approved for a loan at 5%!!!! This was amazing!
To find out how much of a purchase price you can afford all you need to do is take your loan amount that you calculated in Step 3 and divide it by 96.5% (100% - 3.5%). In my example where the loan amount was 145,454.55 our purchase price would be 150,730.10 (if you got a really amall number then all you did was forgot to push the percentage sign, if that's the case just multiply your answer by 100 and you will get the correct amount).
Now that we've looked at the two special programs let's look at the Conventional side, the easiest way to explain conventional loans is for me to tell you they are the cookie cutter loans. They are usually all the same. They have 5% or more down payment, preferrably higher credit scores, lower debt to income ratios, and they are usually pretty quick loans from begenning to end.
To find out how much of a purchase price you could qualify for you are going to use the same equation as above except change the down payment amount to anything 5% or more. For my example I will use 20% down. For our example of 145,454.55 I am going to divide that number by 80% (100% - 20%) this would give us a purchase price of 181,818.19.
WOW, so let's re-cap what we have learned through the first 4 steps:
1st you found out how much your debit to income was
2nd you found out how much of a mortgage payment you could afford
3rd you found out how much of a loan amount you could afford
4th you found out how much of a purchase price you could afford
Congradulations you have completed Step 4!!!!!
To apply for a loan visit My web page
First Time Home Buyer - Step 5
Time to talk about Down Payments.....
It's pretty simple to explain the down payment, this is how much money you want to put down towards the purchase of your property. Purchase price - down payment = loan amount)
BUT, there are a lot of different things to remember when it comes to a down payment.
Depending on which program you decided on your lender will tell you how much you need to put down. This generally has to be your OWN money! How do you prove that it is your own money? Well this is what lenders ask for and look for. Whenever you are buying a new home the lender will want a minimum of 2 month bank statements from you showing how much money you have in your checking, savings, and Cd's. Also, if you do not have enough showing in these accounts they may also want copies of your 401K's and retirement plans. The key to proving that you have money to close is that the balance in your checking, savings, or Cd's has to have been there for at least 2 months. When banks review your statements they will also review the transactions, primarily the deposits. If you have any large deposits they will want to see where they came from, either by copies of checks, deposit slips, or invoices. They cannot verify cash deposits unless you can prove they came from another account with your name on it! If they can't prove it, you can't use it as your qualifying down payment. If yo don't have enough showing for your qualifying down payment you won't get the condition cleared for down payment which means....no deal, you can't buy the home. So what do you do if you don't have the money but someone wants to give it to you?
Well, you are in luck! Through FHA lending you are allowed to have your down payment "gifted" to you. This means that you do not have to pay it back and you can use it for your down payment! BUT, the gift can only be from a family member or close relative, see FHA guidelines if you have questions or contact a local lender (you can also leave a comment for me and I will get back to you!)
Congratulations you have completed the shortest section....part 5! :-)
To apply for a loan visit My web page
It's pretty simple to explain the down payment, this is how much money you want to put down towards the purchase of your property. Purchase price - down payment = loan amount)
BUT, there are a lot of different things to remember when it comes to a down payment.
Depending on which program you decided on your lender will tell you how much you need to put down. This generally has to be your OWN money! How do you prove that it is your own money? Well this is what lenders ask for and look for. Whenever you are buying a new home the lender will want a minimum of 2 month bank statements from you showing how much money you have in your checking, savings, and Cd's. Also, if you do not have enough showing in these accounts they may also want copies of your 401K's and retirement plans. The key to proving that you have money to close is that the balance in your checking, savings, or Cd's has to have been there for at least 2 months. When banks review your statements they will also review the transactions, primarily the deposits. If you have any large deposits they will want to see where they came from, either by copies of checks, deposit slips, or invoices. They cannot verify cash deposits unless you can prove they came from another account with your name on it! If they can't prove it, you can't use it as your qualifying down payment. If yo don't have enough showing for your qualifying down payment you won't get the condition cleared for down payment which means....no deal, you can't buy the home. So what do you do if you don't have the money but someone wants to give it to you?
Well, you are in luck! Through FHA lending you are allowed to have your down payment "gifted" to you. This means that you do not have to pay it back and you can use it for your down payment! BUT, the gift can only be from a family member or close relative, see FHA guidelines if you have questions or contact a local lender (you can also leave a comment for me and I will get back to you!)
Congratulations you have completed the shortest section....part 5! :-)
To apply for a loan visit My web page
First Time Home Buyers - Step 3
Now that you know how much you make, what kind of debt you have, and how much of a mortgage payment you can afford what do you do now? Well this is where the fun all begins.
It is at about this point in my interviews with my customers that I start having to hold my grin back because I start getting overly excited knowing that I am going to tell the people in front of me just how much of a home they can afford...usually it's a lot more then they could have imagined! (I love my job!!)
So here it is, the calculation you have all been waiting for......how much of a home can you afford?
Before we start I need you to do a few things......Find a spot that is comfortable for you to be in, turn off your TV or radio, eliminate all distractions because this is the most difficult part of calculations and your head might start to hurt.
OK now that I have given that small disclamer let's get started.
1st look around the web and find out where interest rates are, you can look at my web page if you would like,>My Web Page.
Once you've found out what rates are like you can start. I'm going to use 5.5% for my examples.
With an interest rate of 5.5% you will be paying roughly $5.5 per 1,000.00 you buy. So how does this help you? Well if you followed step 2 and figured out how much of a mortgage payment you can afford you are going to enter this into an equation, follow this:
$5.5 Your Allowed Mortgage Payment
$1,000.00 X (UNKNOWN AMOUNT)
Now for those of you that aren't math geeks like myself there is a really easy way to find out what the unknown amount is:
It's call cross multiplying!
1000 * Your allowed Mortgage Payment (for example let's say 800) / 5.5 = Unknown Amount
1000 * 800 = 800,000.00
800,000 / 5.5 = 145,454.55
The 145,454.55 is how much of a mortgage you can afford! Yes that's right if you can afford a house payment of 800 then you can afford a loan amount of roughly 145,454.55. Now, remember back in step 1 when I had you write down how much you had saved up and how much you wanted to use as a down payment? You are going to use this to find out how much the purchase price needs to be.
If you write down that you want to put down $10,000.00 then that means that your purchase price would be 155,454.55 you simply add that to the loan amount. Now, before you go running off to find a home you need to know a few things about loan products and down payments. Continue on to step 4 for this.
Congradulations on completing step 3!
To apply for a loan visit My web page
It is at about this point in my interviews with my customers that I start having to hold my grin back because I start getting overly excited knowing that I am going to tell the people in front of me just how much of a home they can afford...usually it's a lot more then they could have imagined! (I love my job!!)
So here it is, the calculation you have all been waiting for......how much of a home can you afford?
Before we start I need you to do a few things......Find a spot that is comfortable for you to be in, turn off your TV or radio, eliminate all distractions because this is the most difficult part of calculations and your head might start to hurt.
OK now that I have given that small disclamer let's get started.
1st look around the web and find out where interest rates are, you can look at my web page if you would like,>My Web Page.
Once you've found out what rates are like you can start. I'm going to use 5.5% for my examples.
With an interest rate of 5.5% you will be paying roughly $5.5 per 1,000.00 you buy. So how does this help you? Well if you followed step 2 and figured out how much of a mortgage payment you can afford you are going to enter this into an equation, follow this:
$5.5 Your Allowed Mortgage Payment
$1,000.00 X (UNKNOWN AMOUNT)
Now for those of you that aren't math geeks like myself there is a really easy way to find out what the unknown amount is:
It's call cross multiplying!
1000 * Your allowed Mortgage Payment (for example let's say 800) / 5.5 = Unknown Amount
1000 * 800 = 800,000.00
800,000 / 5.5 = 145,454.55
The 145,454.55 is how much of a mortgage you can afford! Yes that's right if you can afford a house payment of 800 then you can afford a loan amount of roughly 145,454.55. Now, remember back in step 1 when I had you write down how much you had saved up and how much you wanted to use as a down payment? You are going to use this to find out how much the purchase price needs to be.
If you write down that you want to put down $10,000.00 then that means that your purchase price would be 155,454.55 you simply add that to the loan amount. Now, before you go running off to find a home you need to know a few things about loan products and down payments. Continue on to step 4 for this.
Congradulations on completing step 3!
To apply for a loan visit My web page
Wednesday, July 22, 2009
First Time Home Buyer - Step 2
So you have finished writing down the answers to the top 10 questions....now it's time to do something with them!
First let's decide how much you can afford for a home. For this I am going to teach you a very simple math equation to figuring out what your debt to income ratio is. This ratio is used by ALL lenders to determin how much they will lend you. Most lenders do not want your debt to income ratio to be higher then 43%. That means that with all your monthly bills (the ones on your credit report) can not equil more then 43% of your monthly debt.
To calculate your debt to income ratio follow the bellow equation:
Total Amont of Monthly Debt Total Amount of Gross Monthly Income
(credit report only) / (the amount you get before taxes)
Now to see the amount in the form of a percentage multiply your answer by 100.
What is your debit to income? Right now it should be pretty low (you shouldn't have a mortgage payment in the calculations yet)
So how much of a mortgage payment can you afford? To find this out follow the equation bellow:
Total Amount of Gross Monthly Income
(the amount you get before taxes) X 43% = Total Monthly Debt Allowed
Total Amount of Monthly Debt
Total Monthly Debt Allowed - (credit report only)
The amount that is left over after your monthly debts are subtracted from your monthly debt allowance is the amount of mortgage payment you can afford. If you would like to see an example you can view it bellow:
Total Monthly Debt = $600
Total Monthly Income = $3000
Current Debit to Income Ratio = 600 / 3000 = .20 (multiply by 100) = 20%
Total Monthly Debt Allowance = 3000 * 43% (or .43) = $1290.00
Total Mortgage Payment = 1290.00 - 600 = $690
Congradulations on your completion of Step 2!
To apply for a loan visit My web page
First let's decide how much you can afford for a home. For this I am going to teach you a very simple math equation to figuring out what your debt to income ratio is. This ratio is used by ALL lenders to determin how much they will lend you. Most lenders do not want your debt to income ratio to be higher then 43%. That means that with all your monthly bills (the ones on your credit report) can not equil more then 43% of your monthly debt.
To calculate your debt to income ratio follow the bellow equation:
Total Amont of Monthly Debt Total Amount of Gross Monthly Income
(credit report only) / (the amount you get before taxes)
Now to see the amount in the form of a percentage multiply your answer by 100.
What is your debit to income? Right now it should be pretty low (you shouldn't have a mortgage payment in the calculations yet)
So how much of a mortgage payment can you afford? To find this out follow the equation bellow:
Total Amount of Gross Monthly Income
(the amount you get before taxes) X 43% = Total Monthly Debt Allowed
Total Amount of Monthly Debt
Total Monthly Debt Allowed - (credit report only)
The amount that is left over after your monthly debts are subtracted from your monthly debt allowance is the amount of mortgage payment you can afford. If you would like to see an example you can view it bellow:
Total Monthly Debt = $600
Total Monthly Income = $3000
Current Debit to Income Ratio = 600 / 3000 = .20 (multiply by 100) = 20%
Total Monthly Debt Allowance = 3000 * 43% (or .43) = $1290.00
Total Mortgage Payment = 1290.00 - 600 = $690
Congradulations on your completion of Step 2!
To apply for a loan visit My web page
First Time Home Buyers - Step 1
Wow, well first off thank you for taking a minute to read my blog. Each blog that you read will provide you with information on becoming a home owner. While this might be a scary though for most of you reading this I hope that through all my knowledge and insite you will feel more confident and in control of your future home buying future!
For my first blog I would like to share a bit about what you need to do before concidering to buy a home.
Home ownership is HUGE, let me say that again....HOME OWNERSHIP IS HUGE! Get the point? When you buy a home you are securing your financial future. You are buying something so valuable that later down the road, usualy 5+ years, you can increase your value by 20% at minimum! What does this translate too? Well let's say you buy a home that has a value of $100,000 in 5+ years you should see your value increase to at least $120,000! But before I get into this we should take a step back...
For the first step I want you to get a piece of paper and number it 1 through 10, yes we're going back to school pages. I want you to write down each of these questions and answer them honestly.
Here is a list of questions you should ask yourself...
1. How much do you pay for rent right now?
2. What is the total monthly payment amount of all the payments that show on your credit report? Do not include monthly payments like cell phone, insurance, phone, etc.
3. What is your currently gross (pre-taxed) monthly income?
4. How much do you have in your savings account? How much total savings elsewhere?
5. What payment amount would you be comfortable paying each month?
6. Have you started looking for homes yet? If yes, then where and what price ranges have you been looking at?
7. Are you currently working with a realtor?
8. When was the last time you checked your credit report for errors/accuracy? If it has been longer then 1 year go visit annualcreditreport.com and pull your credit. This web site works directly with all 3 credit bureus and is 100% free. when pulling your credit make sure to decline any of the paid offers, unless you want to sign up for their services. If you need help understanding your credit report see my blog title Credit 101 (soon to come).
To apply for a loan visit My web page
For my first blog I would like to share a bit about what you need to do before concidering to buy a home.
Home ownership is HUGE, let me say that again....HOME OWNERSHIP IS HUGE! Get the point? When you buy a home you are securing your financial future. You are buying something so valuable that later down the road, usualy 5+ years, you can increase your value by 20% at minimum! What does this translate too? Well let's say you buy a home that has a value of $100,000 in 5+ years you should see your value increase to at least $120,000! But before I get into this we should take a step back...
For the first step I want you to get a piece of paper and number it 1 through 10, yes we're going back to school pages. I want you to write down each of these questions and answer them honestly.
Here is a list of questions you should ask yourself...
1. How much do you pay for rent right now?
2. What is the total monthly payment amount of all the payments that show on your credit report? Do not include monthly payments like cell phone, insurance, phone, etc.
3. What is your currently gross (pre-taxed) monthly income?
4. How much do you have in your savings account? How much total savings elsewhere?
5. What payment amount would you be comfortable paying each month?
6. Have you started looking for homes yet? If yes, then where and what price ranges have you been looking at?
7. Are you currently working with a realtor?
8. When was the last time you checked your credit report for errors/accuracy? If it has been longer then 1 year go visit annualcreditreport.com and pull your credit. This web site works directly with all 3 credit bureus and is 100% free. when pulling your credit make sure to decline any of the paid offers, unless you want to sign up for their services. If you need help understanding your credit report see my blog title Credit 101 (soon to come).
9. What price range do you "think" you want to be in?
10. How long until you want to buy?
Now that you have this filled out I want you to hang it on your fridge or your bathroom mirror. Keep it somewhere that you will be able to see it every day. We will call this your homebuying info 101, the information that you provided here will be the begenning to your buying a home.
Congradulations! You have just started your journey to home ownership!
To apply for a loan visit My web page
Subscribe to:
Posts (Atom)
