Guidelines For Determining Your Home Purchase Price Range

Shopping for a home, especially your first one, can be tough when you’re not sure how much you can afford. If you've wanted to live the dream of owning your own home, but haven’t been sure where to start, I've put together a few tips that can make it easier to get a handle on where to start.

The American Dream

1. Tax benefits usually mean you can afford more than your rent. Interest deductions on taxes typically translate into significant savings. Many people find they can afford about 33% more than their current rent. To get an idea of what this might be for you, multiply your current rent by 1.33.

2. A home price three times your gross income is usually a reasonable place to begin. For example, if your household made $75,000 last year, you could begin looking in the $225,000 range to start.

3. Know how much you can put down. Ideally, you’d want to have 20% of the home’s price set aside for a down payment. On a $200,000 home, this would be roughly $40,000. You can definitely put down less money, as low as 3%, but it may result in higher interest rates (which translate to higher monthly payments). It will still be better and most likely less expensive than renting. If you are a veteran, you can buy a home with no money down, and still get the lowest interest rates.

4. Determine your “debt factor.” Lenders will often cite the 28/41 rule when it comes to your debt. This means that your mortgage (plus taxes and insurance) shouldn't exceed 28% of your gross monthly income. Your total payments (credit card, car loan, etc.) plus your mortgage shouldn't come to more than 41% of your gross monthly income.

The Realtors at Armstrong Field Real Estate specialize in helping first-time home buyers getting themselves lined up for home ownership. Contact one of our Massachusetts Realtors today.

7 Tips for Buying Your First Home in the U.S.

Article From BuyAndSell.HouseLogic.com

By: Dona DeZube
Published: April 09, 2013

Help finding your way through the complex U.S. real estate market.

Nothing says you're truly an American like owning a home. And just over half of all foreign-born households living in the U.S. own their own home. If you're ready to join them, try these seven tips for American-style home buying success - the process here may be quite different from what you're used to.

1. Be ready to prove who you are. You don't have to get your citizenship, a green card, or any particular type of visa before you buy a home. But you do need:

          •An Individual Taxpayer Identification Number. (http://www.irs.gov/Individuals/General-ITIN-Information) That's a number assigned by the Internal Revenue Service to foreign nationals who need to file income tax returns. 

         •A valid foreign passport, or two or more current photo identifications, such as a driver's license, to show who you are.

Although property ownership isn't tied to immigration or visa status, there are rules about how long you can stay, so if you're not a citizen, check out U.S. visa requirements before you purchase.

  

2. Plan to get a mortgage, so you don't have to save your money for years to become a home owner and start building equity. The U.S. home loan market offers many safe, affordable mortgages, including ones that allow Muslims to buy a home without violating Islamic laws against paying interest.

To get a U.S. mortgage, you must establish credit and earn a good credit score (http://www.houselogic.com/home-advice/home-loans-mortgages/how-fico-credit-scores-work/). To boost your score:

          •Open U.S. bank and credit card accounts.

          •Report all your income on your tax returns. Lenders use tax returns to verify your income and decide how much you can afford to borrow to buy a home.

When it's time to apply for a mortgage, you'll find major banks with global operations have experience working with foreign buyers and tend to have a process for verifying credit established in other countries.

3. Work with a REALTOR® who is a Certified International Property Specialist (CIPS) and who has experience, training, and education in helping foreign-born home buyers. An experienced real estate or title attorney can help you protect your interests, too.

Tell your REALTOR® how the home buying process works in your native country and ask her to explain U.S. home-buying customs to identify any differences. Even within the U.S., local differences exist in how people buy and sell homes. Knowing how homes are sold here and what to expect with closing costs, inspections, and the negotiation process (http://www.houselogic.com/articles/negotiate-best-house-buy/) reduces your stress and helps you get a good deal on your first home.

4. Don't be shocked by Americans' casual attitudes toward buying or selling real estate; it's a byproduct of the relaxed U.S. business culture. Although real estate contracts must be in writing, the process leading up to the sales contract signing may be more informal and casual than it would be in your home country.

5. Learn to convert from the U.S. standard measurement into metric, or pick up a metric converter app so you can better estimate room and home sizes while shopping.

6. If you're not fluent in English, or prefer speaking in your native language, choose inspectors, mortgage bankers, and REALTORS® fluent in your own language. Although it's possible to get translated copies of standard real estate documents, you'll likely have to sign the English versions during your home purchase.

7. Consider all the real-estate related expenses you'll have as a home owner, including property taxes, home owners insurance, and maintenance costs. Set up a financial plan for your home (http://www.houselogic.com/home-advice/home-loans-mortgages/home-financial-planning/) so you know how much money to set aside for ongoing expenses.

Survey: More Renters Want to Become Homeowners

Article From HouseLogic.com

By: Dona DeZube
Published: August 05, 2013

Homeownership as a priority is on the upswing. And a look back shows perceptions about owning weren't as negative during the recession as the media suggested.

Americans have favored buying over renting, even during the recent Great Recession, and this year is no different. The 2013 National Housing Pulse Survey, by the NATIONAL ASSOCIATION OF REALTORS®, found Americans overwhelmingly believe owning a home is a good financial decision, and a majority of renters say homeownership is one of their highest priorities for the future.

During the recession, much media coverage of homeownership focused on the idea that lots of people thought renting was much smarter than buying. But that wasn't necessarily the case as a look back shows.

The decline in home prices and turmoil in the housing markets did influence consumers' perception of housing as a sound investment -- but not by nearly as much as the media made it appear.

From 2007 to 2011, based on earlier Pulse surveys, the share of people who thought buying a home was a good financial decision dropped from about 85% to 73% and the share of people who were "not so strongly" positive grew. By 2013, we're back to 80% thinking homeownership is a sound financial decision.

You can interpret that dip two ways. Some would say homeowners were resilient as prices declined. Others would say the recession was a wake up call for investors who viewed the real estate market as a short-term investment.

Regardless of which way you see it, most of us have returned to the much more realistic viewpoint that real estate is a solid, if long-term, investment.

This year's Home Pulse survey also found:

          •Eight in 10 Americans think buying a home is a good financial decision.

          •68% believe now is a good time to buy a home.

          •36% of renters are now thinking about purchasing a home, up from 25% last year.

          •The proportion of renters who say they prefer to rent dropped from 31% to 25%.

          •Half of renters say that eventually owning a home is one of their highest personal priorities, up to 51% from 42%.

Those renters should be in a good position to buy given that home prices are pretty affordable (unless you're a bus driver in San Francisco). Rising interest rates could come into play, but anything around 6% looks good compared with the double-digit interest rates of the 1980s.

Attitudes toward the housing market have also improved over the years. Nearly four in 10 Americans (38%) said their local market was more active this year, compared with 51% of people who reported a slowdown in local activity last year.

There is also less concern than in the past about the drop in home values; almost half (49%) said housing prices in their area are more expensive than a year ago.

FHA Softens Condominium Lending Guidelines, But Barriers Remain

Condo Sales May Get Slight Boost, But Financing Rules Remain Tight

Responding to lender, condominium association and consumer outcry that the existing FHA condominium lending guidelines are too strict, the Federal Home Administration (FHA) on September 13, 2012 announced a round of changes which will hopefully make it easier for borrowers to qualify for FHA condo loans. The full FHA announcement can be found here.

While some of the changes are a step in the right direction, I think overall they are a mixed bag, as FHA left some of the most onerous provisions intact. I’m skeptical that these new changes will have a major impact on condominium sales, but of course, any loosening of the strict requirements is a good thing.

Condo Fee Delinquency Rule Increased to 60 Days Overdue
FHA is softening its stance on delinquent monthly condo fees and home owner association (HOA) dues. FHA is now allowing up to 15% of a project’s units to be 60-days delinquent on condo fees, up from just 30 days delinquent under the prior rule. This change acknowledges the depressed economy which has caused many condo unit owners to have trouble paying their condo fees. This is definitely a good change.

Expanded Investor Purchasing Allowed
Under the new rules, investors can come in and buy more units in a project than they could previously. They can now buy up to 50% of the project units, up from just 10% before, but with an important caveat:  the developer must convey at least 50% of the units to individual owners or be under contract as owner-occupied.
See the rest of the article here: FHA Softens Condominium Lending Guidelines, But Barriers Remain

Still Waiting to Buy a Home?

6 Reasons Why Now is the Ideal Time to Jump!

1. The number of homes available on the market is dropping significantly.


2. Home prices are lower than they have been in the last 3 years, but seem to be bottoming out.


3. Interest Rates are still historically at their lowest.


4. The Home Sellers are very motivated.


5. You can deduct your mortgage interest (plus other costs) on your tax return, something you can't do with rent.


6. There is a limited time $7500 tax credit for first-time homebuyers.

Many potential homebuyers have been sitting on the sidelines waiting for the real estate market to bottom out. It's not a bad plan, as long as you have perfect timing. The experts can't even agree among themselves as to whether prices have reached the floor, so trying to time the market can be tricky. Though there are plenty of people who are buying properties right now, it will be nothing like it the rush there will be once prices start to rise again and everyone decides to jump into the mosh pit of buyers making offers!

OK, so there will be more competition in the next 6 to 12 months, but you want to make sure that you don't overpay for a home that you may be able to get for less in 6 months. So if you wait, you will get a better deal, right?

Not necessarily. First of all the inventory (number of properties on the market) has gone down considerably in the last few months, giving you less choices. When supply goes down, demand goes up. When demand goes up, prices tend to rise. It's a basic law of economics. Compared to last year, there are 23% fewer property on the market today, and the number of sold listings are up. The good news for you is that the median on-market home price is down 5.8% compared to October 2007 (for Essex County). But with selection dropping, can it be long before the market turns around?
Mortgage rates are still historically low (take it from someone who paid 14% in the early 90's), with rates hovering around the 6% mark. But rates are extremely volatile, especially with the shape of the financial market and everything that is happening with Wall Street lately. A couple of weeks ago the rates dipped into the 5%'s, but that only lasted a week before jumping up to 6.5% (they have settled a little since). It is likely that rates will trend up, according to most experts. With each jump in interest, you will be paying more in your monthly payment, which would negate any (potential) savings you would make by waiting to buy.

Another reason to buy now is that you are losing all your potential tax benefit of home ownership. You are able to deduct all of your mortgage interest, PMI & closing costs when you buy a home. This would result in a significant tax savings for you. On a $250,000 mortgage that could mean $4600 in tax savings, or about $380 per month over renting. Try out the Rent vs. Buy and Tax Savings calculators here.

One of the recent incentives initiated by the Feds is the First-Time Homebuyer Tax Credit. It gives a 1st time buyer up to a $7,500 credit on your taxes when you buy any home purchased between April 9, 2008 and July 1, 2009. This is not a deduction, this is an actual credit. So if you owed $6,000 in taxes next year, not only would you not have to pay them, the IRS would give you an additional $1,500 refund. If you don't owe any taxes and you are expecting a refund, then the $7,500 would be added to your refund. How cool is that? The caveat is that this is really a refundable credit, so it would be repaid, but only at the rate of around $500 per year starting in 2011. It is basically a no interest loan payable over 15 years. Everyone should take advantage of this credit! Go here for some FAQ on this credit.
One thing I want to point out about what you hear in the media. All real estate conditions are local. What is happening in another part of the country has no bearing on what's the market is like here in Massachusetts, and especially the North Shore.

*All mortgage calculations and tax savings are estimates and are examples for informational purposes only. Please contact your financial, tax or mortgage advisor for more information.