Ten Things Every New Homebuyer Needs to Know

Hey Guys! I just want to you be prepared if your a first time homebuyer.. I was just a first time homebuyer this past month when I bought my first house so I know what you are going through.. If you ever have questions let me know and I can help. Also, as your Realtor I promise be there with you every step of the way!

By HGTV | Published: 10/04/2007

Homebuying can be a confusing and somewhat daunting task. We'll help you understand the homebuying process and find the home that's the perfect fit!

1. Know your needs.

First, examine your lifestyle. Do you long for bucolic pasturelands? Feel energized by urban cityscapes? Looking forward to a family-friendly suburban lifestyle? It's important to think of the limitations each locale places on your lifestyle and the perks each has to offer -- before making the commitment to buy.

Suburban lifestyles are flexible, offering children the opportunity to play outdoors and enjoy a neighborhood environment. Urban areas offer greater social, culture, educational and career opportunities. Rural environs offer privacy, room to roam and the ability to pursue hobbies -- such as gardening -- on a larger scale.

In addition to locale, it's important to think about the type of dwelling you're considering. Will you quickly outgrow that handsome city brownstone? Is a country cottage the perfect size? Will purchasing a condo allow you to forego lawn and home maintenance and enjoy more leisure time?

2. Weigh the costs of homeownership.

There's more to consider than just a monthly mortgage payment. Will you be able to afford the expenses that come with owning a home? Utilities, property taxes, repairs, homeowners association fees, lawn maintenance (unless you will do the work yourself) can all add up.

If you're moving to a new part of town or a new city, it's important to consider the cost of living for that area. Transportation, school tuition and everyday living expenses can also make homeownership more expensive than it initially appears.

3. Better to build or buy?

Having a home custom-built to your specifications can be expensive. But are you ready to take on remodeling and updating an older home to meet your needs?

A remodel can often be expensive and in the end, is less satisfying, and finishing a project yourself, without experience, can result in the purchase of costly tools and the loss of your valuable time. Do your research before signing with a contractor or deciding to revamp an older home.

4. Location, location, location.

A bargain is never really a bargain when located in a bad neighborhood. Sometimes lightning will strike and gentrification of certain areas will result in skyrocketing property value -- but that's rare. It's better to take a chance on a smaller home -- or one in need of repair -- in a great area where the value will only rise.

5. Know your loans.

A loan rate can look great in an advertisement, but once bankers have drawn you in to the branch office, what will you really pay? Points, PMI (private mortgage insurance) and closing costs can drive your mortgage cost up.

Some programs allow buyers to have smaller down payments. But how long are you required to stay in the home without penalty? And how much more will you pay each month?

Be sure to read all the clauses and fine print before getting a mortgage. And don't be afraid to shop around for the best rate.

6. Consider a buyer's broker.

Most real estate agents represent the seller, but a Buyer's Broker (also called a Buyer's Agent) represents your needs and desires and helps you locate the property that's best for you.

While buyer's brokers are difficult to locate in some markets, locating a professional advocate who is required by law to get you the best price and terms can alleviate home shopping stress.

7. Demand full disclosure and a professional home inspection.

Most states require that a home seller disclose potential problems with the property, but the homeowner may not always know or reveal existing structural problems (despite the legal requirement). The only way to truly know what's going on inside (and over and under) a home's structure is to secure the services of a reputable home inspector. Expect to pay $300-600 for the inspection. It seems like a lot of money, but consider the thousands it could save you if the home isn't up to code or has major issues.

8. Get it in writing.

Perhaps one of the best ways to protect yourself is to have every part of the sale in writing, and make sure you understand every aspect before making a commitment. Legal jargon and real estate terminology can be confusing and somewhat frustrating, so hone your real estate vocabulary before house hunting, and don't be afraid to ask a lot of questions along the way.

9. What to do before completing the purchase.

First, make sure your title is "free and clear" and there are no problems with you assuming ownership of the property. Then, purchase homeowners insurance. Finally, decide if the purchase of a home warranty (if not included as part of the sale) is in your best interest. These should all be taken care of before "closing."

10. Don't forget about taxes.

Are your property taxes rolled into your monthly mortgage payment? Or will you be responsible for paying them yearly? Don't forget to keep paperwork for your annual federal or state income tax return. You can often deduct the property taxes, points and interest paid on a mortgage. Set up a consultation with a tax accountant to learn more about the restrictions on these types of deductions.

My Promise

Hello Blog Fans!

I am very sorry I have not been blogging on a weekly basis. I am going to make a promise to you that I will blog at least once a week to keep you updated on Real Estate and Real Estate related things in Texas and the San Antonio area. If you ever have any questions or suggestions that you would like for me to blog about please feel free to make comments or email me!! I hope you enjoy the more posts that I plan to post in the future.. stay tuned and enjoy!!

Love Lindsay

Happy New Year!

Hey Everyone!
I wanted to wish you a Happy New Year! I believe that 2009 is going to be a great year, and may it be a great year to you too! Sorry I have not posted the pictures from the Christmas decorating contest, because of the holidays it's been kind of crazy, but I will do that soon and let you know. Have a wonderful day and i'll talk to you soon!

Christmas Decorating Contest!!!!

Hey everyone!! I'm sorry I'm so late on this blog and that I haven't blogged in a while. However, I do want to share with you my cool news and that my partner Amanda Fauver and I are doing. Tonight at Preston Hollow subdivision we are having a Christmas Light Decorating Contest, and the HOA and their Century 21 neighborhood REALTORs are sponsoring it. The judging starts tonight at 7:00 pm so I hope all of them have their decorations up!! Judging is based on creativity or use of the lights, curb appeal, and most themed. There are five judges total and everything is ranked between 1 and 10 so it should be a fair judging. First place wins to keep the first place sign in their yard until the new year and $100 gift certificate, second place gets to keep the second place sign and a $75 gift certificate, and third place gets the third place sign and a $50 gift certificate. Pictures will be taken of the winners and posted in the HOA newletter as well as my website (which I applogoize is a little bit behind on being updated) www.TexasDreamHouseRealty.net! Stay tuned for I will post the pictures on the website and possibly the blog as well but I'll let you know either way! It should be fun!!

Why is it a good time to buy now?!

A History lesson: Last time we had all this financial "doom and gloom" in Texas, markets tightened up and we had interest rates hovering around 12% to 13%!

Today, we are experiencing the lowest rates we’ve seen in over 20 years…and the largest amount of inventory on the market! What’s wrong with this picture? Why, it’s perfect for us! And it is pretty logical that these rates will not stay depressed like this forever.

But WAIT...??? Nothing happens until we are able to convince those buyers that waiting doesn’t really make sense. Reminding them that low rates rarely tend to stay down, you can create a believable sense of urgency that our buyers can truly identify with.

Let’s say a buyer says, “I think prices may fall another 10%” (which we doubt). But, for the sake of a good example, they should know this:

* Today’s sales price: $225,000
* 90% LTV @ 6.25% -30yr = $1,247 P&I

Prices might fall 10% but what happens if the interest rate goes up 1% in the process?

* Lower Sales Price $202,500
* 90% LTV @ 7.25% - 30 yr = $1,243 P&I

In this case, the buyer may get a lower price, but the change in the interest rate makes it basically irrelevant. Even though the sales price is lower, the payment remains about the same - because of the time spent waiting. Buyers simply need to be educated...and, that's why I'M here! Helping buyers understand what happens "while they are waiting" might create a sense of urgency instead of the "fear of buying"! Ask yourself, what is more likely to happen? Even if prices fall a bit, due to the principle of amortization, if the rates go up, the buyer loses anyway!! BUY NOW!! There's no better time then the present!

The message is obvious: WAITING MAKES NO SENSE!

Mortgage Forgiveness Debt Relief Act

Nov 4, 2008

by Chris Kaucnik, Director of Marketing for Home Warranty of America and Michael J. Greenen, CPA, CFP

No matter the circumstances, there's a lot of stress a homeowner goes through in a foreclosure or a short sale. The loss of the home itself and any equity can add a lot of anguish to a situation that may be beyond the control of the homeowner from job loss or illness to changing market conditions.

Brief Background

Prior to December of 2007 if a homeowner lost his house due to a bank foreclosure, and the bank forgave any difference between the price it was sold for and what was owed, the homeowner would owe additional income tax on that portion. Yes, it's hard to believe, but true.

Let's say the homeowner owed $300,000 on the mortgage, but the foreclosure sale only brought in $200,000. Then the bank forgave the $100,000 shortfall. The homeowner would have been liable for the income tax on the $100,000 debt forgiveness from the bank.

The IRS considered this money effectively paid to the homeowner, and it would be taxable in their top bracket. The special reporting form 1099-C depicts the explanation of this exactly - the "C" stands for cancellation of debt and the law said this was taxable income.

Now, because of the unique stresses in the housing industry lately and on our whole economy, last December Congress stepped in to provide temporary relief in the form of forgiving this debt, but only for the 2007, 2008 and 2009 tax years. After that, the old rule applies again.

But Wait, There's More

To be eligible for this tax relief, the mortgage must be for your principal residence. It does NOT apply to vacation, investment or other properties. And no more than $2,000,000 of forgiven debt can be excluded from taxable income. Well, most of us would fall below that threshold anyway.

Home Equity Loans

Another very important detail in this temporary tax break is if part of the forgiven debt was a home equity loan and used for purposes other than to build, buy or substantially improve the property, that portion is STILL taxable. In other words, home equity loans used for vacations aren't included.

Short Sales

Now, what happens in a short sale? In brief, this can occur when a borrower is behind on the mortgage payments and the lender agrees he can sell his house for less than what is owed on the mortgage. But all proceeds must be turned over to the bank.

The portion of the mortgage the bank forgives, PLUS any commission expenses or other selling costs ARE taxable income if this debt is canceled. Yes, even the commission and selling expenses count. No free rides. But, again for taxable years 2007, 2008 and 2009 Congress has provided the same temporary relief in this short sale situation.

A short sale is not always the answer. First, the bank must agree to it and generally will weigh the cost of the short sale against the cost of a foreclosure.

Other Scenarios

There are situations where the bank sees a homeowner with a great credit history, but who is having trouble making mortgage payments for a legitimate reason. If the bank agrees to reduce the mortgage by say 25%, this is again considered a cancellation of debt and would have been subject to income tax. But for the above stated tax periods, this new, temporary tax provision forgives this income.

Why is there always a catch! If the homeowner does take advantage of debt cancellation by the lender, they are required, when they do eventually sell, to reduce the basis (original price of the home) equal to the amount forgiven.

What does that mean? A homeowner can now receive a $250,000 (single) and $500,000 (married) capital gain exclusion on the sale of their primary residence.
Here's an example where the home was originally purchased for $300,000, there was a $100,000 debt cancellation, and a married couple is selling the home:

Home Sells for $750,000
Less Original Basis* ($200,000)
Less Capital Gain Exclusion ($500,000)
Gain on Sale $50,000
Capital Gains Tax at 15% $7500 (Owed by homeowner)

*This is the original basis or price of home $300,000, less the $100,000 debt cancellation from the lender.

While $7500 capital gains tax is surely a lot less than the $100,000 cancelled by the lender, the homeowner may not think of this or be aware it could happen down the road, perhaps just prior to retirement. And capital gains taxes are always subject to change.

It gets a bit more complicated when one spouse dies and the other is left to sell the home. Consult your tax accountant or attorney for planning purposes.

Mortgage Insurance Affected

It is important to also note that this act extended mortgage insurance as an itemized deduction all the way through 2010. Yes, there's a restriction. The mortgage contract has to be entered into between December 31, 2006 and January 1, 2011.

Housing Market Stabilization

All of this is being done in an effort to stabilize our housing market and should help many homeowners in these situations. Always consult with a professional tax accountant or attorney to be sure you are taking the right road to solving your mortgage crisis and will be covered under this new tax relief act.

Michael J. Greenen is a Certified Public Accountant and Certified Financial Planner located outside of Chicago, IL. For the past decade, his firm has been working with small to medium businesses as well as high net worth individuals who need comprehensive tax and financial planning. Michael and his staff take pride in their commitment to helping their clients achieve their financial goals. Contact: Michael@GreenenCPA.com or at 630.365.1647.

Home Warranty of America, Inc. of Buffalo Grove, IL, was founded in 1996 to provide home warranty coverage for houses, town homes, and condominiums. The Company has experienced remarkable growth to become a leading supplier of home warranties across the United States. More information is available at www.hwahomewarranty.com.