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6 ESSENTIAL TIPS FOR FIRST-TIME HOMEBUYERS

by Rose Price

 

The typical American spends more time thinking about buying a car than buying a house. Even though the house they buy might wind up costing several times as much as the car.

Why is that? While buying a home has long been part of the American Dream, it’s a daunting task – especially for first-time homebuyers. Many would-be buyers, overwhelmed by the process and the current state of the market, give up and decide to rent.

It doesn’t have to be that way. The fact is, today’s housing market is a once-in-a-lifetime opportunity for first-time buyers. Interest rates are at near-record lows, homes are more affordable than they have been in years and there are plenty of homes for sale (with more on the way, thanks to the foreclosure crisis). Buyers are more likely to truly find the home of their dreams than they were in years past.

Based on the questions I’ve received over the years, I’ve compiled a list of 6 tips every first-time home buyer should take. Keep these tips in mind as you begin the search for your perfect home, and I’m sure your experience will be far easier.

Tip #1: What’s the budget? This is the question my husband asked me when we were shopping for our first home. It seems like a no-brainer, but you’d be surprised how many buyers don’t start by figuring out how much money they have to spend on their house purchase. It’s easy to show up at open houses and fall in love, but why waste time looking at homes that are out of your price range? The last thing you want is to find your dream home and realize it’s way over your budget.

Banks will tell you that you can spend up to 28 percent of your gross monthly income (GMI) on your mortgage, taxes and homeowners’ insurance premium, and up to 36 percent on your total debt. If you take out an FHA loan, you can go even higher – to 42 percent of your GMI.
The problem is 42 percent of your GMI will feel like nearly 60 percent of your take home pay, or more if you are contributing to a 401(k) at work. Remember this: Just because someone will lend you more money doesn’t mean you should borrow it.

To calculate a housing budget you can live with, start by figuring out how much you spend each month. Track your daily expenses in a notebook over the course of four weeks to get a real sense of how much is going out and where you’re spending most of your available cash. Watch your savings and calculate how long it will take you to come up with a down payment.

Before you commit to a mortgage amount, be sure to take the true cost of making those monthly principal, interest, taxes and insurance payments each month and apply them to your take-home pay. Don’t worry about mortgage deductions or the after-tax consequences – just look at the numbers and think about what else you spend each month and try to understand if you’ll feel comfortable. Because if you can’t sleep at night worrying about paying the mortgage or fixing your broken water heater, you’re spending too much.

Tip #2: Come up with a realistic wish-list. The key here is ‘realistic.’ Based on the housing budget you figured out, and where you want to live, compile a list of what you’d like to have in your first home.

Research is helpful when putting together your list. Check out some homes in your price range online to get a feel for what your money will buy, and make your wish list based on the home you see. If you’d love a fully renovated kitchen but none of the listings in your price range have one, be prepared to compromise. You can always upgrade later, but you really shouldn’t spend more than you can afford just for nicer finishes.

Tip #3: Get pre-approved for a mortgage. In this market, many deals contingent on financing fall apart because buyers can’t find a bank to give them a mortgage. Getting pre-approved for your mortgage will help you avoid this problem. Start by shopping around for a lender. You should speak to at least three or four different types of lenders including big national banks, mortgage brokers, regional banks, local lenders and possibly a credit union. Check out the Yahoo! Homes Mortgage page to see a list of lenders in your area, along with estimated rates and payments.

Once you’ve compared a few loans from different types of lenders side-by-side and decided on the right one for you, it’s time to get pre-approved. Some lenders will charge for pre-approval, so be sure to ask about those costs up front. You’ll need to provide the lender with details of your credit, income and assets to start the process. The bank will verify everything and issue a letter that tells you, and sellers, how much the bank is willing to lend you.

Typically, pre-approvals are good for 60 to 90 days. If you don’t find a home within that period of time, you may need to re-qualify with your lender.

Tip #4: Find a good home inspector. A knowledgeable home inspector is just as important as a great real estate agent. Getting a home inspection can save you thousands of dollars in the long run, but it has to be thorough. Ask friends and co-workers for referrals, or find out if your real estate agent has anyone they would recommend.

Once you’ve gotten a few names, interview potential candidates. Don’t be afraid to ask questions: find out what their process is for inspecting a home, how long it usually takes, what their expertise is and what kind of information and paperwork you will receive after the inspection. If there’s anything special about the property you’re interested in – for example, a septic or propane tank – be sure the home inspector knows what to look for. Finally, be sure to follow up on any red flags in the home inspection report by hiring experts to come in and take a closer look at a possibly radon issue or evidence of a pest infestation.

Tip #5: Understand the true costs of homeownership. This tip comes from one of my Twitter followers in Florida, @pstaines. Many first-time home buyers get so caught up in the idea of owning a home that they forget about life after closing. The real costs begin after you move into the house. In addition to mortgage payments, you’ll owe taxes, insurance and homeowner’s association (HOA) fees, and be responsible for any maintenance issues that come up while you own the home.

These costs are all the more reason not to spend every last dime on your mortgage payment. If you have nothing left after paying your mortgage, you’ll be unable to pay all the other fees or save for unexpected expenses.
 
Tip #6: You may love the home, but get to know the neighborhood before you make an offer. This is another good tip from one of my Twitter followers, @abirenews in Atlanta. He suggests talking to the neighbors to get the inside scoop on what it’s like to live there. Bad neighbors can affect your property’s value, but good neighbors can be an invaluable resource to first-time homebuyers.
 
If you think you’ve found the neighborhood you want to buy in, take it a step further. Drive from your potential new home to your office during rush hour to see what the commute is like, and to places you’d go on a regular basis like the grocery store, gym and gas station.

There’s a lot to think about when buying your first home, but remembering these tips should help you navigate the process and avoid potential minefields. Take your time, do your research and don’t let anyone pressure you into buying a home you’re not completely sure of. In this market you’ll be there a while, so make sure it’s somewhere you want to live for the long-term. 

 

15
 

 
7 Moving Expense Tax Deductions You Need To Know Before Your Next Move

Moving can be a costly ordeal. Fortunately, the Internal Revenue Service allows you to deduct certain expenses from your taxes, so long as certain criteria are met.

1) Do You Qualify?
The IRS only allows you to write off your moving expenses if the move is for job-related reasons. If you are moving because of convenience, you will not be able to receive tax deductions for your expenses.

2) 39 Weeks
The IRS requires that you be employed full time for 39 weeks of the first 12 months of your move in the area of your new job location in order to qualify for moving deductions. It is not required to have spent the 39 weeks at the same job, but rather a full-time job in the area. You will not be penalized by the IRS if you are laid off or transferred again.

3) 50 Miles Rule
The IRS requires that your commute from your old home to your new job location be at least 50 miles longer than your commute from your old home to your old job. To give an example, if you lived 10 miles from your previous job site, your new job location would have to be 60 miles or greater from your old home. Anything less than the 50 miles rule and you will not be eligible to deduct your moving expenses, per IRS guidelines.

4) Employer Assistance
If your employer is footing the bill for your move, it will impact what moving expenses, if any, you are able to deduct from your taxes. If your employer is paying only a portion of your moving expenses, be sure to keep track of the costs.

5) Self Employment
You can still deduct your moving expenses if you are self-employed. If you own your own business, you will need to meet the standard 39 weeks/50 miles guidelines. If you are self-employed, you will likely be required to meet the 50 miles guideline, as well as a longer 78 weeks rule, meaning you will need to work full time in the new location for roughly 20 months to be eligible to write off your moving expenses.

6) Married Couples
For married couples, only one spouse needs to meet the aforementioned IRS criteria to qualify.

7) Deductible Moving Expenses
The IRS has a short list of allowed moving deductions. Here is an outline of what moving expenses you will want to keep track of to write off as tax deductions later on:

  • Cost of packing and transporting household good and personal effects, whether you are moving yourself or hiring professional movers.
  • Cost of insurance for your move.
  • Costs to connect and/or disconnect utilities because of the move.
  • Cost of one-days lodging expense at your old residence after your belongings have been moved.
  • Cost of storing your belongings at a location that is not your old residence. This applies to storing belongings with a family member or in storage in another city where you had lived previously.
  • Cost of storing your belongings for no more than 30 consecutive days after the move.
  • Cost of one trip for you and your household members. You and your household members are not required to travel the same way or the same time.
  • Costs of car travel; you can deduct your expenses for gasoline, oil, lodging parking fees and tolls. You can either itemize your expenses or choose to deduct 18 centers per mile. Deductions for meals, sightseeing or repairs, maintenance, insurance or deprecation on your vehicle are not allowed.

For more info on moving expenses and your taxes, visit the IRS Web site.

May 17, 2013

Courtesy of:

 

Champaign Housing Market

by Rose Price

Market View for Champaign

Avg. Listing Price $192,853 Wk ending May   01


 
Median Sales Price $152,117 Dec '12 - Feb '13
 
688 Homes for sale 0 Open Homes
317 Recently Sold 104 Foreclosures
Listing price – Champaign
$192,853
-0.9%
 
$152,117
+11.9%
 
$562
+332.3%
 
78
-49.7%
 
Movers & Shakers
Avg. listing price Week -ending May 1, 2013
 
 
 
 
$220,257
 
$133,167
 
$361,920
 
$142,148
 
$83,725

Average price per square foot for Champaign IL was $562, an increase of 332.3% compared to the same period last year. The median sales price for homes in Champaign IL for Dec 12 to Feb 13 was $152,117 based on 78 home sales. Compared to the same period one year ago, the median home sales price increased 11.9%, or $16,117, and the number of home sales decreased 49.7%. There are currently 688 resale and new homes in Champaign on Trulia, including 104 homes in the pre-foreclosure, auction, or bank-owned stages of the foreclosure process. The average listing price for homes for sale in Champaign IL was $192,853 for the week ending May 01, which represents a decrease of 0.9%, or $1,792, compared to the prior week.

 
 

Thinking of Buying a Vacation Home?

by Rose Price

 

Real estate markets across the country are seeing a similar trend: Buyers are taking advantage of the low mortgages by purchasing vacation properties. Specifically, they are buying homes in exotic locations, like at the beach or lake, or in the mountains for prime skiing.

While some of these buyers plan to use the second home as a vacation spot, many are thinking about the possible investment potential. Either way, some are running into trouble when it comes to mortgages. It may be hard to believe, but lenders are stricter with vacation home mortgages than for traditional homes.

Even with immaculate credit, getting a vacation home mortgage can be tough. If you’re thinking about purchasing that house near the slopes, or a lake-front property not too far from the kids, then consider how much it will really cost before you get your heart set on a specific property.
Vacation homes are often more expensive than a traditional home based on location alone, and as a result, lending is tighter. This doesn’t mean you should be discouraged, but it does mean you need to be hyper-aware.

Your credit must be great—720 or above for most lenders. The lender will also scrutinize your existing debt, property taxes, and the mortgage on your existing home.

Additionally, many lenders have been giving out “jumbo” mortgages for vacation and investment properties—mortgages with higher interest rates. Unfortunately, new mortgage guidelines put out by the Consumer Financial Protection Bureau will go into effect in 2014 and may put an end to these popular loans.

If you can afford it, you are better off paying cash than taking out a mortgage with sky-high fees.

Another thing you might want to take into account when looking for a vacation home? Location. Lenders heavily scrutinize the location of your future property.

While all markets took a property value hit, vacation destinations took the brunt of the real estate crash. If the lender thinks the home is in a location where prices may continue to drop, they may reject your loan application. Lenders may also be weary of giving out an out-of-state loan, or working with a location they are unfamiliar with.

A vacation home can be very rewarding, both in its ability to provide a relaxing escape for your family, and in its potential as an investment property. Just be sure to do your research before you jump on board the vacation home bandwagon.

As a Member of the Top 5 in Real Estate Network®, I have a wealth of real estate and homeownership information that may be of help to you. Feel free to contact me any time to learn more about this important information, and be sure to forward this article on to any friends or family that may be interested as well.

Sincerely,

Rose Price
roseprice@champaignrose.com
Prudential Landmark
Office: 217-352-1933
Mobile: 217-202-8843
http://www.ChampaignRose.com

This email was sent by RISMedia, Inc. on behalf of Rose Price.

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