Setting Roots

I wanted to make a quick post and ensure everyone knows that the U.S. Government is NOT offering help to home owners via mail or at any site on the web. All assistance to home owners is in the way of tax rebates, or assistance refinancing and the like. The government is not sending out offers in the mail, and will never send you an offer via e-mail. If you get one of these, please ignore them! They are most likely a scam.

Sadly, these things are popping up more and more, and many people are being taken by them, please do not allow yourself to be one of the victims of these scam artists. If you are curious about what help the U.S. government is offering, the best thing to do would be to contact either the Internal Revenue Service (http://www.irs.gov) or the Federal Housing Administration (http://www.fha.gov) directly. Get your information straight from the source, to avoid being the victim of a scam!

As always, please feel free to leave your comments, and send me your questions! Your feedback so far has been great.

You will hear lots of stories, and see lots of articles touting the benefits of the “Down Market” as far as real estate goes. But don’t let yourself get taken away, or else you may get snapped back into reality real quick. The market is down for a reason, and the fact is that finance companies are hurting in a big way. Don’t let your pre-approval letter get you too comfortable, the way I did.

PRE-APPROVAL IS NOT A GUARANTEE!

Read the fine print. Pre-approval means that the bank WILL give you a loan, though it does not say what the conditions of that loan will be. I was recently pre-approved for 100% financing on my home, but when  I was ready to send the contract to the loan officer, I was informed that the bank would now only cover 97% of my loan. Needless to say I was crushed. If I had a down payment, I would not have sought a 100% loan to begin with. My credit is great, and I was approved for a very low interest rate, I just don’t have enough money saved for the down payment, and the closing costs.

At first I felt as though the bank was trying to scam me, or pull a fast one on me. After making a few phone calls, and discussing the situation for well over an hour with more than a half a dozen people, it was made clear to me that the problem was due to the fact that I am buying in a declining market. With home values dropping, all banks are starting to require a down payment. Which I can understand from the business perspective, but it would have been nice to know about in advance.

Fortunately for me, I do qualify for a VA backed loan, which will proved 100% financing (for now), but incurs some additional costs, and requires a more detailed appraisal. If you do not qualify for a VA backed loan, you may qualify for for an FHA backed loan, or grant.

If you find yourself really strapped for cash, I would suggest that you try putting off the purchase of your home until you have some more saved. Do not be tempted or seduced by mortgage scams, or any program that is set up just to get you into a home quickly. Don’t let yourself get talked into an adjustable rate mortgage, or some other high-risk financing. Remember, it is better to wait, and get a good home, with a good mortgage, than it is to rush and wind up setting yourself up for financial disaster.

What are “Points” anyway? How do they effect my interest rate and overall loan?

The interest rate determines the monthly interest payments over the lifetime of the loan. A “point” or “discount point” is equivalent to 1% of the loan amount and usually reduces or “discounts” the loan rate by an eighth of a percentage point.

For example: You want to get a loan for $100,000 to buy a home. Each “point” would cost you 1% of $100,000 or $1,000 but would reduce your loan’s interest rate by .125%. The lender might offer you an 8.0% loan with zero points, a 7.875% loan with one point, or a 7.75% loan with 2 points.

Points, like the down payment, are paid at closing. In some cases, lenders will allow borrowers to finance the points over the term of the loan. Lenders sometimes use points to make their interest rates appear lower. Be aware that lower interest rate offered by a lender may translate into higher points requirements, which means more money due at closing.

Well, after a lot of searching, online and in person I believe I have found the home of my dreams. The house I have found is so much better than what I was expecting, that it is hard to believe… I will refrain from posting any photos or specific details at the moment, because the deal is not complete, and I don’t want to jinx anything, or risk violating some part of the contract in some way.

The home is about 1,750 square feet, which is huge for me, it is in a beautiful neighborhood and has a 2 car garage. In addition, the house also has an in-ground, heated swimming pool. What’s even better? It’s an enclosed pool. Wow! The house was built in 1995, which really isn’t old by anyone’s standards. Although I have not yet had the official inspection done, I have to say, after having been to the home twice, and thouroughly looking aroung, it certainly appears to be in stellar shape. I have read the seller’s inspections, and there does not seem to be any major problems. The only things noted are that it is still the original roof, and the inspectors seem to think there is only 2-3 years of life left in the roof, and there is a minor crack in the front steps. Neither of these are deal breakers.

The house itself has an interesting story… It was appraised at the end of last year for about $210,000. The original owners were selling it  because the husband got relocated by his job. Apparently a major realty company gave them a “relocation package”. The company put the house on the market at $203,000, but it did not sell. So they dropped the price to $200,000. Still no joy. The realty company then bought the home from the owners, and put it on the market at $199,900. But still it did not sell. They dropped the price to $189,900, and this is where I came in. I offered them $185,000. But I settled on $186,000 and they pay half my closing costs.

The negotiation process was nerve-racking to say the least. My agent called the seller and told them my initial offer, then she called me back with their counter offer, and I call them back with my counter-counter offer, and so on and so forth until and agreement was reached. The entire time, I am crunching numbers, and doing all this mathematical juggling to try to make the numbers work within my budget, and also to make an offer that the seller would accept. It was a very long, frustrating process that really had me worried for a bit. I found out the closing costs were going to be a little higher than I originally anticipated. I had done all my calculations and planning based on 3% closing costs. Well it turns out the closing costs will be 4%, which doesn’t sound huge, but it’s very nearly two thousand dollars, and I am already pretty strapped for cash as it is. It is scary to be so close to my dream, with my dream house, and to see it all almost slip away over a sum of money as small as $2000.

Luckily for me the seller accepted my final offer, I will not need any additional funding from my bank, and I was able to secure funds for my closing costs. So in the end it seems everything is once again back on track, but all-in-all, it was a pretty scary day for me, with a lot of ups and downs. I am looking forward to getting all of this done with, and finally being able to take possession of what I hope to be, my new home.