Buyers Shouldn't Wait on Falling Prices

Fear of overpaying for property is common in today's economic environment, especially in places like California where prices continue to be unstable.

If you find yourself on the fence, afraid to pull the trigger, or just down-right scared about jumping into today's real estate market, because you're concerned you'll pay too much, here are some factors to consider:

Waiting for the right time can be expensive. Some buyers would have more equity today, despite falling prices, if they had bought when they were first considering it, instead of continuing to pay rent.

Financing is fickle. Some people who were highly qualified last year are unable to find financing this year because the credit market has tightened or their personal financial situation now makes them an undesirable borrower.

Interest rates are headed up. If prices decline by another 10 percent, but interest rates increase by 1 percentage point, the monthly payment will be the same.

Don't be the last person on the bus. Educate yourself about your buying power and what options are available to you. With prices at an all time low, you don't want to find yourself chasing the market because you weren't prepared to play the game!

For a free Home Buyer's Information Packet, feel free to contact me anytime. Email all requests to thepropertysource@gmail.com.

The First Steps Series-Finding a Realtor

A Real Estate Agent will help you save time and effort in your search for a new home. They have access to home buying tools and with their experience will guide you through the buying process. An agent will assist in finding a home that suits your needs and price range. They’ll help you:

 

1.    understand the contracts and paperwork

2.    find a home that meets your needs

3.    search property values in your area

4.    negotiate the offer

5.    coordinate the closing process

Buying and selling real estate is a complex process. Every property is unique. No two properties are alike. Homes differ and so do contract terms, financing options, inspection requirements and closing costs. Also, no two transactions are alike. An experienced agent can walk you through the legal forms, financing, inspections, marketing, pricing and negotiating. 

Talk to family and friends. See what experiences they had with the Realtors that sold them their homes. Ask for referrals but make sure that the agent is right for you. Take the time to interview more than one agent.  In the times of where over 80% of both buyers and sellers turn to the internet when they initially decide to buy or sell, it is to your advantage to have a tech savvy REALTOR.  Remember, your agent is an extension of you and you want to make sure he/she represents you well.

The First Steps Series-Get Pre-Approved

Get Pre-approved for a Loan

Very few people buy a home with cash. According to the National Association of REALTORS® (NAR), nearly nine out of 10 buyers finance their purchase, which means that most all buyers -- especially first-time purchasers -- require a loan.

When it comes to financing, the real issue is not getting a loan (anyone willing to pay higher interest rates can find a mortgage), but getting the loan that provides a mortgage with the lowest cost and best terms.

Agents suggest that serious buyers start the mortgage process well before bidding on a home. By meeting with lenders and looking at loan options, you will find which programs best meet your needs and how much you can afford.

REALTORS® also recommend pre-approvals for another reason: Purchase forms often require buyers to apply for financing within a given time period, in many cases, seven to 10 days. By meeting with loan officers in advance and identifying mortgage programs, it won't be necessary to quickly find a lender, check credit, and rush into a financing decision that may not be the best option.

A pre-approval letter, unlike a pre-qualification letter, involves verification of your financial information. The lender will ask for documentation to confirm your employment, the source of your down payment and other aspects of your financial circumstances. Granted, a pre-approval is more time-consuming (and possibly more stressful) than a pre-qualification. The additional due diligence is exactly why the pre-approval carries more weight and shows your borrowing power.  You can visit as many lenders as you like and get several pre-approvals, but keep in mind that each one carries with it a new credit check, which will show up on future credit reports.

Although not a final loan commitment, the pre approval letter can be shown to listing brokers when bidding on a home. It demonstrates your financial strength and shows that you have the ability to go through with a purchase. You'll have more leverage in negotiations with the seller. Sellers often prefer to negotiate with pre-approved buyers because the sellers know such buyers are financially qualified to obtain the financing they need to close the transaction. A pre-approval letter is an especially favorable point in situation where the seller is presented multiple offers.

Keep in mind, pre-approval letters aren't binding on the lender, are subject to an appraisal of the home you want to purchase and are time-sensitive. If your financial situation changes (e.g., you lose your job, lease a car or run up credit-card bills), interest rates rise or a specified expiration date passes, the lender will review your situation and recalculate your maximum mortgage amount accordingly.

 

How do you get pre-approval?

Real estate financing can be obtained from a number of sources, including banks, savings and loan, credit unions, mortgage companies, various government lenders and in some cases, individual REALTORS® themselves. Talk with several lenders before you decide. Your real estate broker will be familiar with lenders in the area and what they are offering. With their experience they can usually suggest lenders that have a variety of programs and competitive rates.

The loan officer will carefully review your financial situation, including your credit report and other information. The lender will then suggest programs which most-closely meet your needs.

This is also an opportunity to ask your lender about the following programs:

·      Government Loan Programs: FHA and VA offer loan programs particularly beneficial to low-and moderate-income individuals.

·      State and Local Housing Programs: Potential home buyers can familiarize themselves with a variety of state and local housing programs that offer additional benefits in their local area

           

For instance, a first-time buyer may qualify for state-backed mortgage programs with little money down and low interest rates, while a repeat purchaser (someone who has bought a home before) with more equity (money invested in the home) might want to get a 15-year loan and the lower overall interest costs it represents. Typically, first-time buyers opt for the traditional 30-year loan, with either a floating interest rate or a fixed rate of interest over the life of the loan.

 

The First Steps Series-Credit Scores and Credit Reports-Part 2

What is a Credit Score and Credit Report?

Credit Scores
A credit score is a single number that helps lenders and others decide how likely you are to repay your debts. One kind of credit score is a FICO score (FICO stands for Fair Isaac Corporation Inc., the company that developed a common scoring method). FICO scores range from 300 - 850 points.
When you apply for a mortgage, your credit score is evaluated. Your credit score may also be used to determine the mortgage interest rate.
Your credit score is based on several types of information contained in your credit report:
Your payment history.Late payments will decrease your credit score.
The amount of debt you owe.If your credit cards are at their limits, this can lower your credit score - even if the amount you owe isn't large.
How long you've used credit.Your credit history is important. If you show a pattern of managing your credit wisely, keeping credit card balances low, and paying your bills on time, your credit score will be positively affected.
How often you apply for new credit and take on new debt.If you've applied for several credit cards at the same time, your credit score can go down.
The types of credit you currently use.This includes credit cards, retail accounts, installment loans, finance company accounts, and mortgages.
Your credit score is only one factor in the credit decision. Mortgage lenders also look at your credit report, employment history, income, debt-to-income ratio, and the value of the home you want to buy.

What the Numbers Mean
FICO does not make specific statistics available to the public regarding credit scores. However, they do provide some snapshot numbers that can help you understand how to interpret your credit score:
Credit scores ranging from 770 to 850 are considered very good, and the best credit rates are usually available to borrowers within this
Credit scores above 700 are considered good, according to FICO, and most borrowers' credit scores are within this range. The median credit score is about 725.
When credit scores are below the mid-600s borrowers may experience higher interest rates when looking for a loan.
It is important to remember that credit scores are like snapshots of your credit – they show a "picture" of your credit based on current information. By using credit wisely, you can improve your score over time.


Credit and Credit Reports
Your credit can have a big influence on whether or not you can get a mortgage, as well as the terms of the loan and the interest rate. If you have good credit, you will have a wider range of options. That is why it is important to understand what affects your credit and to monitor your credit reports regularly.
Your credit report should accurately represent your credit history. From the moment you first apply for a loan or a credit card, you likely have a credit history.
Credit-related transactions appear on your credit report, including your current debts, paid debts, and payment histories. Your credit report is compiled by three private companies: Equifax, Experian, and TransUnion. These companies sell your credit report to banks and other creditors so they can review your past credit history.Your credit report includes:
A list of debts and a history of how you've paid them.This can include credit cards, car loans, and student loans.
Any bills referred to a collection agency.This can include phone and medical bills.
Public record information.This can include tax liens and bankruptcies.
Inquiries made about your creditworthiness.An inquiry is made when you apply for credit. Your credit report can also show if you were given credit based on the inquiry.
Adverse or derogatory credit information in your credit report is required to be deleted after 7 years (bankruptcy-related information and federal tax liens are required to be deleted after 10 years). Your credit report is continuously updated, which is why you should always know what it looks like.
Additionally, regular monitoring of your credit can help you spot and put a stop to identity theft early before your credit is seriously harmed.

Happy House Hunting!

The First Steps Series-Establishing Good Credit-Part 1

So you're thinking about buying a home? Well one of the most important factors you should be thinking about is your credit. The first step in the homebuying process is understanding your credit.
When you apply for a mortgage, lenders will review your credit report. Your credit report is a history of how you've managed your finances: it's a record of money you've borrowed, your history of paying it back, and how much open credit is available to you.
Your credit report follows you wherever you go and will have a big influence on whether or not you can get a mortgage, the terms of that loan, and the interest rate. If you have good credit, you may have a much wider range of mortgage options with lower rates.

So how do you better understand credit?

Be aware of how important your credit history is to the process.

1. Building good credit is not difficult, but it does require time and patience. Here are some tips to follow:
   Pay your bills on time. Credit Scores emphasize your most recent payment record. Paying on time raises your credit score. If you've been late, start paying on time!
   Pay at least the minimum amount required. If you can pay more do so- it's a good idea if you can afford to. But you should never pay less than the minimum.
   Keep your credit card balances low. "Maxing out" your credit cards can lower your credit score.
   Don't apply for too many loans or new accounts. Applying for a lot of credit in a short period of time may concern lenders that you won't manage your debt well. Only apply for credit when you need it.
   Keep your debt-to-income ratio at 20%. Generally, you should not have debt that's more than 20% of your net monthly income.
   Establish credit if you don't have any. Open a free or low-cost checking or savings account and make regular deposits. Only write checks when you have money to pay for things. And apply for one or two credit cards, use them carefully, and pay them off each month.

Next time we'll talk about Credit Scores and Credit Reports!

Happy House Hunting!!

The First Steps Series-How Much House Can I Really Afford?

As we have been discussing, there are many advantages to buying a home versus renting one. Use this Rent vs. Buy Calculator to help you to compare the costs of renting to the costs of buying a home. But once you've punched the numbers and decide if buying is right for you, HOW MUCH HOUSE CAN YOU AFFORD?! To figure out the amount you can afford view the Affordability Calculator on Realtor.com. Your income, savings, and monthly expenses play an important role in determining just how large a mortgage you can afford.

In many cases, the amount of money you'll spend paying rent can be about the same as or less than the amount a you'll spend on a mortgage. With the tax benefit for homeowners, the savings can be significant.

Ginnie Mae has a Buy vs. Rent chart that shows a cost comparison for a renter and a homeowner over a seven year period. In their example:
The renter starts out paying $800 per month with annual increases of 5%. The homeowner purchases a home for $110,000 and pays a monthly mortgage of $1,000. After 6 years, the homeowner's payment is lower than the renter's monthly payment. With the tax savings of homeownership, the homeowner's payment is less than the rental payment after 3 years.

Keep in mind that when you decide to become a homeowner, you accept all responsibility for paying for the expenses associated with ownership. Be aware that there are many additional costs to your monthly mortgage payment and you should always include these in your budget estimates:

Here is a list of those extra expenses you'll need to consider:
Property Taxes and Special Assessments
Home/Hazard Insurance
Utilities
Maintenance
Home Owner Association (HOA) Fee: Doesn't apply to all purchases. It pays for trash and snow removal and maintenance of common grounds if applicable. These are common for condos, townhomes, new development communities, gated communities.
Membership Fee: It may pay for recreational facilities (use of a pool or gym) and other services (cable TV).

Once you are able to determine how much house is comfortable for you, do a trial run. Save the amount of your mortgage for at least six months. First, figure out how much buying a home in your estimated price range will cost you each month. DO NOT forget to include an estimate of the extra expenses pointed out earlier. Subtract your current rent (monthly) from the total figure you estimated above. Then on the first day of each month, deposit the difference between your rent and the estimated costs of homeownership. If you can do this every month for six months without being late, feeling stressed, or having to compromise your current lifestyle too much, then you may be ready to take on the financial burden of owning a home!!

Happy House Hunting!

Tuesday News

Government report shows construction of new homes jumped 22% in February

Is the housing market heating back up??

Last week, there was an indication that the housing market may be heating back up. New mortgage applications for home purchases and refinances suddenly surged as they hadn't in the last eight months. Applications for FHA loans to buy houses were up by 10.4 percent. And overall home purchase applications jumped by 7.1 percent. Meanwhile mortgage interest rates dropped to their second lowest level in nearly two decades, according to the Mortgage Bankers Association. Thirty year fixed rates averaged 4.96 percent and fifteen year rated dropped to just 4.5 percent.
New applications for financing to purchase homes point to rising purchase contracts and closed sales in the months ahead. They also suggest that prices have hit a level in many markets that is attracting once-hesitant buyers off the sidelines.
There's still another factor that's likely at work here as well: Congress's recent improvements to the home purchase tax credit -- pushing it to $8,000 from $7,500 and making it non-repayable.
A rise in home purchase applications does NOT suggest we've turned the corner in the cycle or have solved the multiple challenges facing markets around the country -- high foreclosure levels, continuing domination in some areas of REO and short sales, and continuing increases in the unemployment rate.
Even amid these problems, however, there are some hints of possible improvements ahead. More than half of the nation's foreclosures in 2008, researchers found, were concentrated in just 35 counties in 12 states. You can guess where: California, Las Vegas, Phoenix and Florida.
But the really eye-opening finding: In more than 650 other counties, representing one fifth of all markets in the U.S., foreclosure numbers have actually declined since 2006.
Foreclosures are horrible no matter where they occur. But the fact is: Huge portions of the United States have NOT been seeing record foreclosures, short sales or even serious property value declines. They're doing better.

The First Steps Series-Making the Decision to Buy or Rent

Today we are going to talk about making the decision to Rent or Buy and highlight some of the Advantages and Disadvantages of buying a home.

One of the first decisions that you need to make if you are considering buying a piece of property, is whether buying a house instead of renting one is the right path for you. Many people assume it's always an advantage to purchase a home, and for most, it is. Buying real estate is one of the smartest financial decisions most people will ever make. However there are some serious factors you must take into consideration first to see how your situation will be affected by choosing to rent or buy. You have to ask yourself: Do I know what I want? Do I have the money? Are my finances in order?

I have outlined some of the most important advantages and disadvantages of Renting and Buying below.

Advantages of Renting:

1. Renting does not require a large amount of cash up-front in terms of a deposit or downpayment. (we'll cover the costs of purchasing a home in a later Series)
2. You know exactly how much rent you will be paying each month and it is constant throughout the life of the lease
3. There is little or no responsibility for maintenance
4. It's easier to move-when your lease is up, you just pack up and move on
5. Even though you are not gaining equity, you're not losing it either

Disadvantages of Renting:

1. You will never gain equity
2. No tax advantages (those go to the owner of the property!)
3. Many times you have limited or no ability to personalize your living space.
4. You have no control over increases in rent
5. There is always a possibility of eviction (particularly if the owner decides to sell)

Advantages of Buying:

1. Property builds equity over time.
2. Tax benefits
3. Sense of community, stability, and security
4. Free to change decor and landscaping
5. Not dependent on landlord to maintain property

Disadvantages of Buying:

1. You are responsible for maintenance of your property
2. Must have the money for a down payment and closing costs-larger initial investment
3. Your responsible for property taxes
4. There's always the possibility of foreclosure and loss of equity
5. If you want to move, you generally must sell your home
   

Before buying, you need to consider all the costs of homeownership

On average you need to add another 40-45% to your monthly mortgage in housing costs. You must consider maintenance, utilities, insurance, property taxes, etc...You also need to consider any immediate costs, which include home improvements (painting, landscaping, fixing cabinets, changing toilets, buying furniture, etc).

Happy House Hunting!

What to Do in a Depressed Real Estate Market?

With the economy and real estate market in the pits, many people are wondering, is it the right time to buy a house? Are you confused about what to do in a depressed economy when it comes to purchasing a home? Well you're not the only one! Every where you turn financial experts are providing advice about what to do in the current real estate market. And what's frustrating is that the advice tends to differ depending on whom you talk to or what publication you are reading! Some experts predict recovery is on the horizon, maybe even before the end of 2009, while others hold little hope for an immediate recovery, giving another 5-10 years before things turn around.

Well what are we supposed to believe? What's clear to everyone is that the economy is the poorest it has been in decades due to the sub-prime mortgage meltdown - which involves high default rates on the sub-prime and other adjustable rate mortgages, the negative amortization teaser loans resetting - which is causing more homes to be available on the market, home-builders inflating the value of homes, and homebuyers abusing the refinancing system and using their homes as ATMs.

So is it the right time to buy?

The inventory is huge, flooded with foreclosures, REOs (bank owned properties) and short sales. Many buyers who have adjustable rate mortgages -also known as ARMs, or used 100% financing as a vehicle to purchase a home see their interest rates adjusting and some are beginning to lose their homes with many more to lose theirs in the future. With so many homes on the market, it's a buyers market and sellers (both banks and homeowners) are forced to drastically reduce prices if they want to sell their property. They are fiercely competing against one another for a small pool of qualified home buyers, which allows the potential purchaser to negotiate better pricing for the home. Alot of sellers are even throwing in incentives, to "sweeten the deal" in the hopes they'll be able to get rid of their properties sooner.

Also, with interest rates at near historic lows, homebuyers have the opportunity to pay less interest on their next home purchase, which can be a significant reduction in cost. If you wait to buy a home there is a possibility interest rates will go up.

People in the best position to buy have researched the current housing market, the areas they want to live in, have good credit and have sufficient savings in the bank.

In any market, especially today's market, real estate should be looked at as a long term investment. Property values are not going to increase like we've seen in the past few years. Be realistic. Really consider all of your options. Take your time and find a home that fits your needs and your pocketbook. Compare prices of other homes in the neighborhood, evaluate the amenities, your commute to and from work, the school systems, and other features. Have your credit in tip-top shape, get pre-qualified with a reputable lender, and have cash available in the bank for a down-payment, closing costs and any immediate improvements you may need to make to your new home. Be prepared for the REOs, short sales and foreclosures that will be available. As good deals come on the market you may need to make an offer immediately to ensure you get the property you want. Never think you can wait to make an offer...Good deals usually don't last! Find a local real estate agent you trust and one you feel can do the job of negotiating the best deal for you and your family. Never offer the asking price unless you know for sure there are other offers on the table and this is the house you just have to have. In most situations, I would suggest making an offer under the list price to and see what kind of deal you can get.

Regardless of the market conditions, you must be educated and prepared to make a move when the time is right for YOU!

Happy House Hunting

Property Transfer

Recently questions about Property Transfer were asked on The Property Source group discussion board on Facebook. Just in case some of you are the few you don't frequent Facebook, I am reposting the Q&A here.

Questions:

I'm interested in transferring property into my company name. I don't have a complete understanding on how that's supposed to work. So here we are, looking for a little direction in this area. The title needs to be transferred into the company’s name. Would a Warranty deed be used for the transfer the property? Or would a quit claim deed be used? Once the transfer is complete, the company will now be listed as the grantee. Right? Would the property taxes, now be sent to the company? Would I be able to deduct any and all repair or upgrade cost as business expenses?Would I still be able to receive the various tax incentives for home ownership or would that be negated due to the home being listed under the company?If not would the company receive these benefits?How many properties can I transfer under the company name?No rush on this, great idea for this board. Always be selling. Korrey

Answers:

The first thing I’d recommend is consulting a real estate lawyer as well as a tax adviser. They’ll know the laws and can ensure everything is done properly and that title is actually being transferred.

Here are some suggestions though.

Quit Claim Deed-a deed that conveys any interest the grantor may have in the property at the time of the execution of the deed, without any warranty of title or interest.

Warranty Deed-a deed that expressly warrants that the grantor has good title; the grantor thus agrees to defend the premises against the lawful claims of third persons. The person who transfers the property is called the ‘Grantor’. The person/entity the property is transferred to is called the ‘Grantee’.

Though some say a quit claim is sufficient, you will probably want to do a warranty deed (vs. a quit claim deed) which will need to be prepared in the company’s name, filed and recorded in the appropriate office located in the jurisdiction in which the property(s) is located. This is usually at the county recorders office. The deed then must be signed by the person or entity transferring the property and will require notarization. You will be named the grantor, the company named the grantee.

Also, do you have a mortgage on your property? If the loan is not paid in full prior to or at the time of transfer, the deed will only transfer subject to the mortgage. You will need to look at your loan documents to see what conditions, restrictions and limitations it may have on your ability to transfer the property without having to pay the loan off. Almost all mortgages have “due on sale clauses”. Technically moving the property to an LLC, corporation, or limited partnership is considered a “sale.” You will need to negotiate with your lender to attempt to transfer the loan and the mortgage to the LLC. Sometimes they let this slide if you are the owner of the property and the sole owner of the company, but if not you made be made to refinance or acquire a new loan. Another thing to consider are the potential taxes you may have to pay. Any profit made on the “sale” of a house is subject to being taxed. Transfer can also trigger a property tax reassessment at the current market value. Consult your tax guy about this.

Now some people just make the title change and don’t tell the bank but there is a possibility that doing so may come back to bite you. The mortgage company will eventually figure out title to the property has been changed because the tax notices are now in the name of your company. You’ll also want to make sure you have your insurance in order. You’ll need to make sure you’re property is insured under the company name. In terms of deductions for any and all repairs/improvement costs as business expenses, and various tax incentives I would advice you to consult a tax adviser. They can provide the details of what you can deduct and how much. One thing to keep in mind that and incentive programs you look into as a personal homebuyer can be looked into under the company as well. The programs will probably have specific guidelines for companies applying for their incentives.

I believe you can transfer as many properties as you want into the company name. There is a such thing as a Series LLC's which are generally of interest to individuals who have several large assets (such as multiple properties) for which they desire to maintain separate liability protection. I do not think this is allowed in California though.

Hope this helps...

Homebuyer Incentives

In an earlier post (The First Steps-Plan Ahead-March 5, 2009) I mentioned first time homebuyer incentives. I was asked a few questions about how these work and want to answer those questions.

Question: So what are Homebuyer Incentives?

Homebuyer incentives come in many shapes and forms. Incentives that assist potential homebuyers can be provided by city, state and federal agencies, the property developer, the lender or even the seller of the home in the form of discounts, credits or renovation allowances, just to name a few.

Many times these agencies offer seminars or classes where you pay a small fee to learn about the available programs. They outline the application process, guidelines and requirements needed to qualify for the incentive. If you meet the program requirements, you can utilize the applicable incentives toward the purchase of a new or existing home.

Question: So once you get qualified for the program, is there an expiration? Do you have to purchase a home within a year or certain time period?

Well that depends on the program. Programs vary as do the requirements and qualifying guidelines. There can be time restrictions or programs based on availability. For example a Federal Housing Tax credit of up to $8,000 is now available for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009.

Question: Are those incentive programs only good for those particular areas or can the classes be transferred to another program/area?

Most incentive programs have very specific areas in which you must purchase your home, and though the transfer of incentives to other areas is limited by the guidelines of each program, many time you are able to use one program in conjunction with other programs you qualify for.

If you are a law enforcement officer, teacher or firefighters/emergency medical technician you can take advantage of HUD's Good Neighbor Next Door Sales Program. HUD offers a substantial incentive in the form of a discount of 50% from the list price of the home. Now there is a catch! In return you must commit to live in the property for 36 months as your sole residence and many of the homes available are in communities that the city is trying to redevelop or revitalize. If you don't like any of the homes in the revitalization areas then you can't apply the incentive to non-HUD homes!

In another example, The Long Beach Housing Development Company, offers a second mortgage program for low to moderate-income homebuyers, but the homes for sale are in 4 distinct redevelopment areas. You are able to use CalHFA low interest rate programs with the LBHDC Home Buying Programs.

Every month the LBHDC provides Home Ownership Education seminars that will provide information on all the first-time home buying programs in the City of Long Beach. These seminars also educate you on how to select a home, find a realtor, choose a lender, and understand the financial issues involved with securing an affordable mortgage. The seminar is required in order to take advantage of the homebuyer incentives. It's worth the nominal fee (~$25) to learn about how these programs can be used by you to get into your first home!

There are many first time homebuyer incentives out there. It just takes a little time and effort to learn about and research which ones may be right for you. I have provided a list of key agencies you can research below.(I'll also list these in the sidebar under Reference Websites for Young Homebuyers) Find out about the available programs and what steps need to be taken to qualify for them. Understand the rules and guidelines...some programs require repayment of the initial incentive amount or a portion of the profits from the sell of the home.

California Housing Finance Agency (CalHFA)-
Offers low interest rate first mortgage programs and a variety of down payment assistance programs to eligible first-time homebuyers. CalHFA programs can be used with LBHDC Home Buying Programs.

• U.S. Department of Housing and Urban Development (HUD)
• The Federal Housing Administration (FHA) – which is part of HUD – insures the loan, so your lender can offer you a better deal.
• Veteran’s Administration (VA) Home Loan Program-Low interest Home Loans for eligible Veterans.
• Housing Development and Preservation (Mortgage Credit Certificate)

Hope this answers some of your questions. Feel free to post comments or additional questions if anything is unclear!

The First Steps Series-Plan Ahead

In college, my friends and I did not spend a whole lot of time thinking about buying our first home. We were preoccupied with academics, athletics, parties, dating and future career possibilities. However, with my parents being in real estate, I learned young, that there are a number of good reasons to start learning early about what it takes to buy a home and the responsibilities of homeownership.

Here are five recommendations for young people who want to position themselves for homeownership:

1. Establish good credit habits and a favorable credit history. The higher your FICO score, the lower the interest rate you will be offered on a home loan. Get a credit card and use it responsibly. Make sure you make your payments on time every month. Keep track of your credit report. Under a new Federal law, you have the right to receive a free copy of your credit report once every 12 months from each of the three nationwide consumer reporting companies. To request your free annual report under that law, you must go to http://www.annualcreditreport.com/.
If you're already struggling with credit card debt or have large student loans, take a free workshop from the non-profit Consumer Credit Counseling Service.

2. Start saving for a down payment and closing costs early. Open up a savings account and set up automatic deposits with a bank that offers high rates with no fees and no minimums, such as ING Direct. In years past, it was fairly easy to purchase a home without having a significant amount of money saved. With the current mortgage crisis, lenders have become more strict and requiring 5, 10 and even 20% down payments. The days of no-money down financing are no more. Saving early can be beneficial because you'll get the advantage of compounding interest and have a longer period of time to grow your investments.

3. Educate yourself on the home buying process. Read, Read, Read! There a thousands of books out there about buying a home. Make a financial plan for yourself. You can learn a lot about real estate, budgeting and credit on the Internet. One of my favorites is REALTOR.com® .

4. Research the areas you'd like to live. Do you want to stay in the city you grew up in or do you see yourself living in another city or even another state. Know if you can afford the areas you like. Also find out if those towns offer first time homebuyer incentives?

5. Do you know anyone in real estate that can provide reliable information about the cost of homes in the areas you want to live? Parents, cousins, friends? Don't be afraid to ask questions, you might just get the answers you're looking for!

The First Steps Series

Over the next few weeks I will be doing a "First Steps Series" that will outline and detail in depth what you need to do to prepare yourself for home ownership. I will provide checklists, links to useful resources and define many of the real estate terms along the way.

Enjoy your the path to Ownership...