2010 First-Time Home Buyers' Guide; Everything you need to know about jumping into the real estate market this year
Since a steady income stream is essential to homeownership, only those with sound job security should pursue a home purchase. Foreclosure auctions are the third type. Since laws vary from state to state, properties typically can't be inspected beforehand, and transactions are usually handled in cash, first-time home buyers should leave auctions to the experts, O'Toole says.
Article found in March 1, 2010 U.S. News & World Report..
Mortgage rates are sitting near all-time lows, with 30-year, fixed mortgage rates falling to an average of 4.88 percent in November from 6.09 percent a year earlier. And while they're likely to increase, rates should remain attractive throughout 2010, experts say. If that's not enough, Uncle Sam is handing out tax credits worth up to $8,000 for qualified first-time home buyers who close the purchase of a primary residence by the end of June. "You have got some of the best housing affordability conditions in many markets that [buyers] have seen certainly in their lifetimes--and perhaps even their parents' lifetimes," says Mike Larson of Weiss Research. "If you are not encumbered by a previous home you are trying to sell, this is great for you."
Jobs first. Many Americans are taking advantage of these conditions to become homeowners, with first-time home buyers accounting for more than half of home sales in November. But as we learned during the housing bust, "because everybody's doing it" is a terrible reason to buy property. Instead, would-be buyers must first determine whether or not it's the right time for them. And that means they must take a critical look at their employment situation. Although the economy is showing signs of life, the national unemployment rate stood at 10 percent as the year began, and it is projected to move higher. Since a steady income stream is essential to homeownership, only those with sound job security should pursue a home purchase.
Staying put. In recent years, many homeowners got into trouble because they purchased properties that were more expensive than they could reasonably afford. To avoid this pitfall, first-time home buyers should plan to devote no more than 30 percent of their monthly household take-home pay to housing costs, which include principal, interest, taxes, and insurance combined, says Gail Cunningham of the National Foundation for Credit Counseling. Homeownership comes with a number of expenses that renters don't have to worry about. In addition to utilities and in some cases homeowners association fees, property owners are responsible for landscaping, servicing heating and cooling equipment, and taking care of any unexpected headaches that pop up. "It's essential to have that rainy-day fund for the leaky toilet or the leaky roof," Cunningham says. This conservative budget also gives homeowners additional flexibility to weather a job loss, illness, or other financial setback. And because home prices are still declining in many markets, would-be buyers should avoid purchasing property unless they plan to remain there for at least five years. This time horizon helps allow prices to recover even if they decline initially.
Go slow. Home prices should improve slowly if at all this year, so there is no reason for buyers to feel rushed or act impulsively. Before beginning your real estate search, establish your price range by getting preapproved by a mortgage lender. Next, click through online real estate search tools like Zillow, Realtor.com, and U.S. News partner Trulia to get a broad feel for the market. Consider reaching out to a real estate agent with experience in the local market, but don't let the agent do all of the work. "If you are going to invest this much money and take on this much risk, you shouldn't rely on just a Realtor to give you advice," McCabe says. "You owe it to yourself and your family to do all the research possible."
To dig deeper, find a couple of good blogs that cover local real estate, says Patrick Kitano of Domus Consulting Group. Signing up to receive bloggers' Twitter feeds is even better. "Twitter is a breaking-news channel," Kitano says. "And if you are a consumer stepping up to the plate as a first-time buyer, you want accurate, real-time information." In addition, buyers should hit as many open houses as possible, poke around neighborhoods, knock on doors, and chat with nearby homeowners about the community.
Since a steady income stream is essential to homeownership, only those with sound job security should pursue a home purchase. Foreclosure auctions are the third type. Since laws vary from state to state, properties typically can't be inspected beforehand, and transactions are usually handled in cash, first-time home buyers should leave auctions to the experts, O'Toole says.
Article found in March 1, 2010 U.S. News & World Report..
Mortgage rates are sitting near all-time lows, with 30-year, fixed mortgage rates falling to an average of 4.88 percent in November from 6.09 percent a year earlier. And while they're likely to increase, rates should remain attractive throughout 2010, experts say. If that's not enough, Uncle Sam is handing out tax credits worth up to $8,000 for qualified first-time home buyers who close the purchase of a primary residence by the end of June. "You have got some of the best housing affordability conditions in many markets that [buyers] have seen certainly in their lifetimes--and perhaps even their parents' lifetimes," says Mike Larson of Weiss Research. "If you are not encumbered by a previous home you are trying to sell, this is great for you."
Jobs first. Many Americans are taking advantage of these conditions to become homeowners, with first-time home buyers accounting for more than half of home sales in November. But as we learned during the housing bust, "because everybody's doing it" is a terrible reason to buy property. Instead, would-be buyers must first determine whether or not it's the right time for them. And that means they must take a critical look at their employment situation. Although the economy is showing signs of life, the national unemployment rate stood at 10 percent as the year began, and it is projected to move higher. Since a steady income stream is essential to homeownership, only those with sound job security should pursue a home purchase.
Staying put. In recent years, many homeowners got into trouble because they purchased properties that were more expensive than they could reasonably afford. To avoid this pitfall, first-time home buyers should plan to devote no more than 30 percent of their monthly household take-home pay to housing costs, which include principal, interest, taxes, and insurance combined, says Gail Cunningham of the National Foundation for Credit Counseling. Homeownership comes with a number of expenses that renters don't have to worry about. In addition to utilities and in some cases homeowners association fees, property owners are responsible for landscaping, servicing heating and cooling equipment, and taking care of any unexpected headaches that pop up. "It's essential to have that rainy-day fund for the leaky toilet or the leaky roof," Cunningham says. This conservative budget also gives homeowners additional flexibility to weather a job loss, illness, or other financial setback. And because home prices are still declining in many markets, would-be buyers should avoid purchasing property unless they plan to remain there for at least five years. This time horizon helps allow prices to recover even if they decline initially.
Go slow. Home prices should improve slowly if at all this year, so there is no reason for buyers to feel rushed or act impulsively. Before beginning your real estate search, establish your price range by getting preapproved by a mortgage lender. Next, click through online real estate search tools like Zillow, Realtor.com, and U.S. News partner Trulia to get a broad feel for the market. Consider reaching out to a real estate agent with experience in the local market, but don't let the agent do all of the work. "If you are going to invest this much money and take on this much risk, you shouldn't rely on just a Realtor to give you advice," McCabe says. "You owe it to yourself and your family to do all the research possible."
To dig deeper, find a couple of good blogs that cover local real estate, says Patrick Kitano of Domus Consulting Group. Signing up to receive bloggers' Twitter feeds is even better. "Twitter is a breaking-news channel," Kitano says. "And if you are a consumer stepping up to the plate as a first-time buyer, you want accurate, real-time information." In addition, buyers should hit as many open houses as possible, poke around neighborhoods, knock on doors, and chat with nearby homeowners about the community.