If you are a first time homebuyer, we understand that buying your first home can be daunting.  Getting all the facts before you jump into the purchase market, is a step in the right direction.  The following questions will help you get started to understand the marketplace in the Tri State area of Delaware, Maryland and Pennsylvania.  Today the choices for first time homebuyers have never been better.  

An often used mortgage product for many first time homebuyers is FHA.  The facts about how you can qualify for this program is included in this informational blog.  

Part I Getting Started

Part II Finding Your Home

Part III You’ve Found It

Part IV General Financing — Questions:The Basics

Part V First Steps

Part VI Finding The Right Loan For You

Part VII Closing

Part VIII How Can HUD And The FHA help Me Become a Homeowner

Part IX Mortgage Insurance

GETTING STARTED

1. HOW DO I KNOW IF I’M READY TO BUY A HOME?

You can find out by asking yourself some questions:

  Do I have a steady source of income (usually a job)? Have I been employed on a regular basis for the last 2-3 years? Is my current income reliable?   Do I have a good record of paying my bills?   Do I have few outstanding long-term debts, like car payments?   Do I have money saved for a down payment?   Do I have the ability to pay a mortgage every month, plus additional costs? If you can answer “yes” to these questions, you are probably ready to buy your own home.

2. HOW DO I BEGIN THE PROCESS OF BUYING A HOME?

Start by thinking about your situation. Are you ready to buy a home? How much can you afford in a monthly mortgage payment (see Question 4 for help)? How much space do you need? What areas of town do you like? After you answer these questions, make a “To Do” list and start doing casual research. Talk to friends and family, drive through neighborhoods, and look in the “Homes” section of the newspaper.

3. HOW DOES PURCHASING A HOME COMPARE WITH RENTING?

The two don’t really compare at all. The one advantage of renting is being generally free of most maintenance responsibilities. But by renting, you lose the chance to build equity, take advantage of tax benefits, and protect yourself against rent increases. Also, you may not be free to decorate without permission and may be at the mercy of the landlord for housing.

Owning a home has many benefits. When you make a mortgage payment, you are building equity. And that’s an investment. Owning a home also qualifies you for tax breaks that assist you in dealing with your new financial responsibilities- like insurance, real estate taxes, and upkeep- which can be substantial. But given the freedom, stability, and security of owning your own home, they are worth it.

Many homeowners today have decided just to stop making their mortgage payments. When mortgage payments stop, there is usually some time period before the lender will call the note and take action to get back the property.

When the lender that holds the mortgage takes back the property for nonpayment  there is a period of time where nothing really happens with the property.  The term for this hold period is called “shadow inventory” by the real estate world. Not all properties are released for sale immediately, because such a rush of new homes for sales can cause an even worse marketplace for real estate.  No one really knows how many properties are out laying dormant in the shadows just waiting to be put on the market for sale.

When these properties finally work their way through the system and show up listed in the marketplace, they are listed or sold at a price well below the market.  The primary reason for these  below market cost reductions is simple; lenders don’t want the headache of keeping up with a vacant property.

Good news for Delaware, Maryland, and Pennsylvania Homebuyers

You are in  the drivers seat, since this is a buyers market and if you have the will, now is the time to purchase the house you’ve always wanted, but thought the price was too high.

Many of the homes being released from the shadows are owned by Fannie Mae and Freddie Mac.

Fannie May HomePath

Fannie Mae has two programs called HomePath and HomePath Renovations.    There are benefits with going along with a Homepath financing, which usually include about 3% help to offset closing costs and many cases, you may incur no real estate transfer tax. 

Underwater sounds like a diving game, but seriously speaking, when underwater is mentioned in the context of mortgage, it is no game.

Many Delawareans are underwater on their mortgages.  Underwater simply means you may owe more on your mortgage than your home is worth.  But a life preserver is available!

About one in four US borrowers, or 11 million homeowners, are underwater, according to data provider CoreLogic.

Proponents believe that reducing underwater borrowers’ loan balances would be the most effective antidote to the US’s housing woes, but critics believe that “such action would impose significant costs on lenders, investors and taxpayers, and would have unforeseen consequences on the future of US housing finance.”  Easy to say, if you are not the one that is underwater.

Earlier this week Fannie Mae updated its seller guide to reflect the changes announced as part of the must anticipated HARP 2.0 Program.  Many of the changes announced were already included  in Fannie Mae’s release on the HARP 2.0 program  in November, however it was indicated that Fannie eliminated the requirement that the lender determine if the borrower has a reasonable ability to repay the mortgage.  This is quite a game changer for homeowners who may be underwater. 

Here is some good news that may be of interest if you are in the market to purchase or refinance here in Delaware. The average weekly Freddie Mac survey rate for the 30-year fixed rate shows that rates keeps dropping.  This past week there was a 5 basis points drop during the week ending Dec. 15, returning to its record low of 3.94% for the first time since early October.

Not only did the 30-year hit a record low in the most recent week but the 15-year fixed rate  droped 6 bps to 3.21%.