HOME START

The State of Illinois has finally caught up with many of our neighbors. The Home Start Loan Program is now available through Illinois Housing Development Authority. Home Start features two different programs. While this is good news, there are no Vermilion County lenders appearing on the site's data base of participating institutions.

For our purposes we will be focusing only on the Tax Credit Advance Loan, today. You must first qualify for the 30 Year Fix Rate Loan. You may borrow 3.5% of the loan amount not to exceed $6000. This is an interest free loan if it is repaid by June 30, 2010. Failure to do so will lead to the loan becoming a 10 fixed rate loan. You will be required to attend a homebuyer education program. And finally, if you close on or before 11/30/2009, you will earn the First Time Home Buyer tax credit. So don't forget to file form 5405 with your taxes. For complete details please besure to read the plan overview provided by IHDA.

On a related note HR 2801 currently in committee is a promising piece of legislation. Hear are the high lights:

1. Extend the eligibility for the tax credit to all who are purchasing their primary residence.
2. Extending the purchase date through 12/31/2010.
3. To take effect upon passage of the bill.

There are rumors the top rebate will go up from the $8000 offered in the current legislation. This is in Ways and Means at the moment. But I will keep tracking it and keep you posted.

Knowing What You Want

Ok, so you are prequalified or pre-approved for a new home. You know what your interest rate is going to be. You know what you can afford. What next? My first suggestion here is that you decide what you want. It seems like such a no-brainer. But, I have spent countless hours with buyer who said they would know the right house when they saw it. Two years later we're still looking.

I am not trying to denigrate any one here, but an agent can't truly help you unless you know what you're looking for. Make a list of wants and needs. Be as detailed as you can be. This will become helpful as we move on. Some things to consider in that list include geography (or school district) and condition you are willing to accept. Think about how the home will serve you for the next 5 years.

The five major considerations aer:
I Location
II Size
III Condition
IV Features
V Price

I Location: There are a few obvious considerations here. What is the school district? How far from work are you? There are some don't an agent can't get involved in. Some won't even talk about items that are public record for fear of getting into Equal Housing areas of concern. The best bet when it come to "that neighborhood", whatever that means for you, is to check the local news paper, the local crime stats, etc. It will help you identify the area and you won't scare your agent because he (she) is afraid of being accused of "steering".

A couple of other items to consider: Is there something nearby that might cause stress in your life? A high traffic area, railroad tracks, a manufacturing facility, etc. While on the surface it may seem like a little thing, if you are a day sleeper because of work, a school playground too close, might keep you from getting the rest you want. You hang outs: do you think you must buy your groceries daily from only one source. Is church important in your schedule and your congregation like family? Again, if you're a creature of habit, it might bring stress into your life when your new home is farther away than you would like.

A TIP: Visit the neighborhood during a variety of times on different days. Look for the traffic patterns, unusual activity, etc. If you think you like the neighborhood because it's quiet. Driving through on Friday @ 9PM, might reveal whether your hard working neighbors are party animals that will be keeping you up all night and trashing your yard with their empties. Or an after school drive by may reveal what looks like a nice place to raise the kids has no one for them to play with.

II Size Size will encompass a lot of things. In the preliminary investigation, try to make it as general as you can. While room sizes, number of rooms, SF, etc all play a roll, making the criteria too rigid may cut out places that could work. Floor plans may make home with 2400 square feet (SF) less functional than some some with 2000 SF. A finishable basement or attic may make a cute little home one in which a family has room to grow. So this are ways around some of those standards.

III Condition: Some time ago, I would have said that foreclosures or "fixer-uppers" would be a deal breaker for my family because I don't have the time or skill set to do many types of renovations. But there are some possibilities here. With a good contractor and the right starting price a house in need of work might get you a beautiful home. If it's a Fannie Mae you can check into whether it qualifies for Home Path Renovation financing. For Owner occupied or other foreclosures the 203 K loans previous mentioned might be a viable alternative. So that home that needs a new roof and carpet through out may work after all.

A quick example: I recently sold a listing in need of significant repair. Floors were shot and the casement (cranking) windows wouldn't seal. The home was in the most sought after school district in our county. Selling price:$28,500. Repairs: $15000 Total cost: $43000. As repaired appraisal: $71,000. This young single mom with no one to help repair a project house will be moving in to her new home in just a few weeks after closing. The catch: do you have time to wait? If so, this is definitely worth considering.

IV Features: Too me this is something I can do with out. Most features can be modified to achieve what I want. But I have known of buyers who didn't want to waste time on homes without fireplaces. The husband said his wife had always dreamed of having a fireplace where she could curl up with a good book and drink coco. He wanted their retirement home to fulfill that wish. The type of heating or air units may also be flexible because they can be changed in time.

V Price I drop this down this list because it had its own day.

By prioritizing wants and needs you can reduce the time it takes to find the right home. It will also help you know the trade offs your willing to make. Can we double the kids up for a little while since there small, knowing we have room and to finish their rooms in the attic? The other benefit of prioritizing wants and needs is it will reduce the stress involved in getting into your new home.

Helpful Links

Here's a summary of useful links featured in my blogs over the past week:

Preparing for home ownership

Buying guide lines

203K Loans

FHA Resource Center

Illinois Association of Realtors Assistance

Central Illinois Debt Management & Credit Education

Free Credit Reports

Declined? Now What? Buying 101 D

I called this 101 D because you have been "declined". It's a serious thing. And I am not trying to make light of the situation. But, this is also not a time for self-pity and withdrawal. Instead, this is a time to take on the problem head on. I found an interesting and helpful article. Here's a quick summary:

1. Ask Why. Can't fix what you don't diagnose.


2. Find a fix ... may be easier than you think ... if not most can be repaired within 1 year.


3. Don't give up ... try some one else. Some times differnt types of lenders, ie a credit union, vs a bank, can make the difference.


4. Try again. Or, as the adage says, "If at first you don't succeed, try, try again." ... recaps the above three points.

For help contact Central Illinois Debt Management and Credit Education, INC. or try e-mailing Mrs Leary directly.

A quick word of warning, do not fall for quick fix credit repair scams. That is a full post of it's own. You can often accomplish the same results for free if you will exert a little effort. Order your free credit report, and then work on eliminating the issues.

An alternative you can pursue at this point is a Contract for Deed ... Caveat emptor: Buyer beware. You will find many of these homes are over priced, in ill-repair, are in less popular areas, or have limited terms. It is this last point that will require you fix your credit, anyway.

Don't go it alone. Get an attorney to help. I can say from personal experience, I will never do another without referring buyers and sellers to different attorneys. Better safe, than sorry.

Home Buying 101 or Three Reasons to Get Pre-qualified

A young couple wants to buy their first home together. They call a Realtor (r) only to be told they need to be pre-qualified at a minimum. But they haven't even seen the first home. What gives?

First things first. Most people think the answer is finding the home. Truly I recommend that be the last step. Prior steps in the process are speaking to a lender, choosing an agent, and, making a wants and needs list.

A good place to start is a home buyers course ... What? School? Are you kidding? Not every one needs this step. But for 1st time buyers or credit challenged buyers a class conducted by a debt management organization, can be a big help. It will give you a neutral starting point and help you get your "ducks in a row". It also helps get FHA approval.
Why find a lender first... three basic concepts to deal with here:

1. What can you afford?
2. How much will you need out of pocket?
3. What terms will be included in the offer?

Question 1: How much can you afford? Getting a pre-qualification will help you discover exactly how much the bank is will to loan. I have seen couple disappointed after finding the perfect house only to be told it was more than they could qualify for. Banks will require certain debt to income (DTI) ratios or loan to value ratios (LTV). Some loan officers (the good ones) will even let you do a pre-approval. In this scenario, you will actually complete the mortgage application before you go out to look.

If you are limited to homes that qualify for a traditional FHA loan, there will be homes that do not meet the FHA specs, you can avoid. Or, if you find a great value in a wonderful neighborhood, you'll know if you can afford a 203 K mortgage that will allow you to buy a home that normally wouldn't qualify for FHA and will include renovation costs in your mortgage.

Question 2: How much will you need out of pocket? That is a question I am asked often. The answer is, "it depends." At a minimum, you should count on a down payment of 3.5% if the house qualifies for FHA. If you are getting a conventional loan it will be between 5 & 20% depending on the lender and the program. This information will also help you determine the closing costs, and other expenses you might need to pay ... Once done, you will know how much of the inheritance you have just received will be left over for furniture.

Question 3: What terms will be included in the offer? In IL and IN we include mortgage terms in the offer. When you submit the offer, it is contingent upon loan approval under certain terms. Things you will need to know are: What interest rate? What LTV % you need? What the length of the loan term will be. (A side note here: if you can afford the higher monthly payment of a 10 or 15 year fixed rate mortgage, it will yield a tremendous savings over the course of the mortgage. If you haven't looked at the options check out good

mortgage calculator. Be sure you look at the amortization schedule to see your total investment in your home.) If you cannot find a home under the terms in the agreed upon contract, you will be able to terminate the contract without penalty.

Now that you know the answers to the three questions, it's time to take the next step: finding the right agent. Will help you with some tips, next time. For more information, check out the helpful HUD guide or this one from the National Association of Realtors.