Aaron Gallagher

First Time Home Buyer Guide

Complete First Time Home Buyer Guide.

The home buying process can be quite complex, even for those who have been through it a few times. For the first time home buyer, the process can seem impossible. This guide breaks down the home buying process into 14 steps, with information and resources provided to make each step achievable. Also, most
states offer first time home buyer grants and low interest loans for those within specific income limits. For most people, these programs can make the difference between being able to afford your first home or not.

Here are the 15 steps to buying your first home:

1. Establish good credit.

The first step in the home buying process is establishing good credit. Banks and mortgage lenders will not lend to first time home buyers unless the borrower has a history of borrowing money and paying it back in a timely manner. If you have absolutely no credit references, you will need to get some. The most basic way to do this is to visit a local bank and deposit a small amount, let's say $500. You would then apply for a $500 loan, using the money that you deposited as security for the loan. This is the simplest, quickest way to establish a good credit report.

If the loan term is for 6 months, make payments for the first 3 months, then pay the entire loan off. Repeat the process with larger and larger amounts. This will build up an excellent track record. Do this repeatedly, and you'll progress to a point where you don't need to deposit any money as security, your track record will be strong enough to be able to borrow with just your signature.

Unless you are independently wealthy, or come from a wealthy family, the process of becoming a first time home buyer starts with establishing a good credit history. At the same time that you are building your credit with bank loans as just described, you should also be using credit cards responsibly as well. This means paying off the entire balance every month.

2. Raise your credit score.

A high credit score is one of the most important elements to the first time home buyer. Home buyers with high credit scores are able to get the lowest interest rates on home mortgages. As a first time home buyer, it is doubly important to have a high credit score.
Here are the basic tactics for getting a high credit score.

A. Always pay your bills on time.
B. Keep your credit card balances at zero, or at least very
low.
C. Make more than the minimum monthly payments.
D. Negotiate to remove negative items from your credit report.
E. Borrow great credit from a relative or close friend.

For more in depth information on raising your credit score, I suggest you send for an excellent free kit. Improving your credit score will likely take a minimum of 2 months, but will be well worth the wait. By getting a higher credit score, you will greatly increase your chances of approval on the loan as well as qualify for the lowest rates given only to those people who have the best credit rating. This complete kit is available for free. You simply pay $1.97 for shipping. We highly recommend the Free Credit Repair Kit for those in need of improving their credit score.

3. Save for a down payment & closing costs.

When buying your first home, you'll need money for a down payment as well as closing costs. This applies to previous home owners as well as first time home buyers. Lenders want borrowers to have a vested interest in the property. If you've put your own money into the house, you will be less likely to walk simply away from the property.

It is very important to start saving immediately. Set aside a certain amount every pay period and stick to it. Learn to live on what remains. Save now for your future, and your future will take care of you. It will be very, very beneficial to save every week, even if it is a meager amount. We strongly suggest that you open an account and discipline yourself to set aside a certain amount every week. It is a habit that will pay dividends the rest of your life. I suggest you open an account with First State Bank (217) 239-3000 on Neil and Windsor, ask for Jan she'll be happy to help. Even if you only save $10 per week, it is a great habit to develop. I highly suggest you discipline yourself to save a certain amount each and every week.

4. Keep detailed records of money spent.

First time home buyers (and everyone else for that matter!) should develop a sound budget. To gain control of your money And how you spend it we recommend that you keep track of every single purchase, no matter how small, for a period of one month. At the end of this period, categorize this information to see the exact breakdown of where your money is spent. You'll be able to easily see where there is room for improvement in your budget. The important point to stress here is to live within your means. The more you save, the quicker you'll reach your goal of buying your first time home.

5. Develop a financial plan.

When constructing a house, builders use a set of blueprints as a detailed plan they follow to accomplish the goal. In like manner, first time home buyers need a financial plan to follow in order to achieve the goal: buying your first house and moving in. To buy that first house you should set a goal of saving 20% of the purchase price to use as the down payment. There are programs that will allow you to put less than 20% down, including mortgage insurance where you can purchase a home with a down payment of 5% or less. I cannot stress enough that the first time home buyer need to develop a financial plan and stick to it.


6. Establish a relationship with an agent.

Any potential first time home buyer would benefit greatly by early on establishing a relationship with a real estate broker that specializes in working with first time home buyers. As with any profession, the range of expertise will vary from agent to agent. Shop around until you find one that you are Satisfied with. Remember to inform each prospective agent that you are a first time home buyer, as many agents have their specialties. Some agents like to work only with real estate investors. By declaring up front that you are a first time home buyer, you won't be wasting time trying to develop a working relationship with an agent that has a specialty that doesn't match your need. Your agent will be your link to all the property in your area that is currently for sale. Agents can provide a treasure trove of information on the entire buying and selling process. As a first time home buyer, you definitely should seek the help of a professional agent. I obviously recommend myself but I'm biased!!

7. Study market values.

When buying your first home, you will not want to pay more for a house than the house is worth. Along the same line, you will likely want to find a great deal. The only way to find a great deal is to study the market values in your area. Over time, you'll development a mental database of comparable properties and get a sense for which properties are overpriced and which ones are under priced. Your first home will likely not be your last. The average American sells her home and moves into another every 7 years. As a first time home buyer, you will benefit greatly if you purchase a home for less than what it is worth. This instant equity will boost the profit and cash to you when it is time to sell. Ask me about my AutoNotify system it will help you save time and money when looking for a home.


8. Get Pre-approved for a mortgage.


Not all lenders are created equal: some will be very efficient and helpful in dealing with the first time home buyer, and some will not. However, getting pre-approved for a mortgage is an important step in the first time home buyer process. With a pre-approval, your offer will carry more clout with the seller, and you'll be in a position to close on the purchase more quickly. This is important to many sellers. Offering a quick closing is also a powerful tactic in negotiating a discount off the purchase price. For a no-cost, no-obligation pre-approval, call Mark Cortez at National City Mortgage 217-363-4180 tell him Aaron said to call for $250 off closing costs.

9. Decide your needs and wants within your budget.

Builders, brokers, and bankers all know that the typical first time home buyer has a tendency to be overly enthusiastic; they've all seen it repeatedly. As a first time home buyer, you'll need to be aware of this temptation and really focus on making choices that fit within your budget. Everyone would like 5 bedrooms and 5 baths in their first home, but not everyone can afford such luxuries. When you buy your first Home, you'll be taking on a major financial commitment. There will be lots of incidental expenditures. As a first time home buyer, those incidental costs can really add up and strain your budget. Be careful not to overspend on the house that you choose.

It is important to spend ample time on steps 4, 5, and 8. These steps will help you know and understand your budget. Once you know your budget and the price range of homes your budget will allow, you'll be able to shop for the right home. Again, avoid the trap that most first time home buyers fall into: don't stretch your budget beyond what it can handle.

10. Shop for the right home.

With the exception of moving in, shopping for the right home will likely be the most exciting step for first time home buyers. By this time you should have already established a working relationship with a real estate agent that specializes in working with the first time home buyer. You should already know your budget and how much you can afford to spend on your first home. You'll need to summarize all this information for your agent to use to suggest certain homes to visit. Start with the price range. Let your agent know how much you are qualified to spend. Then list amenities that you desire such as number of bedrooms, and additional items such as a deck,
fireplace, whirlpool tub, etc. If you are hoping to purchase your first home in a certain area, or within a certain distance from work, let your agent know that too.

The more information that you give to your agent, the more time can be saved by everyone. Your first home may not have everything included that you could possibly want, so decide which items are negotiable, and which aren't. Let your agent know. The more homes that you visit, the more knowledge you'll develop regarding property values in your area, and which homes you like and which homes you don't in your price range. However, being a first time home buyer, you'll need to understand that your agent gets paid on commission (usually paid for by the seller). Therefore, your agent will not want to spend the next 3 years showing you 500 different properties without you actually making a purchase. Likewise, you would not want the agent simply showing you one home in your price range then pressuring you to make an offer.

An ideal world for the agent would be one sale for each time she shows a home. On the other side of that same coin, an ideal world for the first time home buyer would be the opportunity to look at several hundred homes or more before ever making an offer. The ideal world doesn't exist for either the agent or the first time home buyer. Reality will be somewhere in between. You'll want to look at a reasonable selection of homes in your price range. That will be a good compromise for both the agent and the first time home buyer.

11. Learn about the elements and terms of a sales contract.

As a first time home buyer, by definition you've never been a party to a real estate purchase and sale agreement. You'll need to do some studying to learn the elements and terms of a sales contract. Here is a short list of the basic elements of a real estate contract:

Acceptance: How much time the seller has to either accept the offer or to provide a counter-offer.
Closing: A future date by which time the closing will take place.
Description: A legal description of the property as well as the street address.
Deposit: How much initial money is included with the contract and who will hold it.
Financing Contingency: A clause that states the entire contract is subject to the purchaser being able to obtain a mortgage loan of X amount, by a certain date. First time home buyers should make sure their agent includes this clause in the contract.
Home Inspection: The contract can be contingent upon a satisfactory home inspection to be done by a qualified professional within X number of days.
Inclusions and Exclusions: Some items in a home are not considered part of the real estate, but are instead personal property. Refrigerators and washing machines fit this category. This clause should state exactly what is included in the sale, and what isn't.
Insurance: Who will insure the property until closing.
Price: The amount of money the buyer will be paying to the seller.
Possession Date: The date on which the buyer will receive possession of the property.

Your agent knows each element of the contract in detail. He/She can answer any questions that you may have in this area.

12. Submit your offer.

After completing the first eleven steps in this guide, the first time home buyer can confidently submit an offer. If you've followed these steps up to this point, you are well armed with the necessary info to purchase your first home. Making your offer is an art, not a science. Dozens of books have been written explaining techniques and methods of successful real estate negotiation. Here are some basic negotiation guidelines:

A. Know the seller. It goes without saying that you want to purchase the house for as little as possible, and the seller wants to sell the house for as much as possible. Somewhere in between is the settlement range. Try to find out what the seller wants besides a high price? A quick closing, or a delayed one? Does the home need some work like new carpet, new siding or windows? Does the seller want to get this work done, or would she rather not deal with the hassle? The more info you can gather, the better position you are in to negotiate a win/win situation.

B. Determine what would be the best case and worst case scenarios. Once you've done this, decide how much risk is involved. How bad do you want this house? Are you willing to loose the deal to try to get your best case scenario? Only you can answer that question.

C. Be professional at all times. The best negotiators remain emotionally neutral throughout the negotiation process. By doing so, it is much easier to remain professional. If you are insulted or upset during the negotiation process, you'll likely make decisions based upon your elevated emotions, rather than logic. Rarely will emotional decisions be correct. Try your best to remain unemotional. This is particularly difficult for a first time home buyer, as buying your first home is a very, very emotional event. However, the more professional you are, the more likely you are to succeed in your negotiations.

13. Arrange for a home inspection.

Even experienced real estate investors will depend on a qualified home inspector. This should be doubly true for the first time home buyer. Qualified home inspectors will examine in detail such items as roofing, heating and air conditioning systems, structural integrity, siding, windows, plumbing and electrical systems. Deficiencies in any of these components will be brought to your attention in a detailed written report. I highly recommend that every first time home buyer consult with a qualified home inspector. You should make your offer contingent upon a satisfactory report. Call Troy Doehring with Techspec 217-398-9796 he's one of the best


14. Arrange for homeowners insurance.

All real estate owners should have homeowners insurance, and the soon-to-be first time home buyer is included in this group. For the best rates on home owner insurance, call Craig Detamore with Allstate Insurance 217-356-5533

Congratulations! You are about to become a first time home buyer! You are now ready to make your moving plans. The easiest, but most expensive option is to hire a professional moving company or borrow my moving truck it's FREE!! That's it. You are now ready to enjoy the fruits of your labor and planning. I wish you many years of enjoyment in your first new home!

For more information please call Aaron Gallagher 217-373-4804 or email: aaron@aarongallagher.com I always here to help.

6 Reasons You Should

Buy Your First Home

Renters: Here are six very strong reasons why you should move out of your rental and buy your first home.

If you do not yet own a house of your own and are currently renting, here are 6 very, very compelling reasons why you should buy your first home.

1. Enjoyment. The primary reason you should purchase a home is for the enjoyment it will bring you and your family. You should buy a home that you will love living in! Undoubtedly, the first house you buy will not be the home you live in the rest of your life. As you mature your income will likely improve and your housing needs and desires will expand. You will likely sell your first home and trade up to a larger, nicer one. However, your primary focus when choosing your first home is to buy a house that will bring you enjoyment each and every day that you live there. If you do that, the improvements in your quality of life will be literally priceless.

2. It is an investment. My parents bought their first home in 1965 for $12,000. It was a modest home, just under 1,000 square feet, in a relatively nice neighborhood of similar homes on the outskirts of town. Today, that same home would sell for $175,000.

3. Tax Savings. The tax savings from mortgage interest can be huge. If you are currently paying $1,000 per month to rent your apartment, that same amount applied to a mortgage loan payment would result in a nearly $12,000 tax deduction (in the first few years of a conventional mortgage, nearly all of the payment goes towards interest, and very, very little goes toward paying off the loan. The interest is tax deductible). If you are in the 28% tax bracket, this one deduction would be an annual savings of over $3,300 on your income taxes.

4. Financial Benefits. Whatever you are currently paying for rent, it is money that is simply spent, never to return to you again. Contrast that to buying a home using a mortgage loan; instead of spending money on monthly rent, you are paying off a loan used to purchase the property. With each monthly payment, the loan balance goes down, and the equity in your property goes up. The monthly payment goes toward buying an asset that will go up in value. Besides the shelter that is provided, you get to keep an appreciating asset.

5. Privacy. As a renter, you are not entitled to the same level of privacy that a home owner is entitled to. It is common for landlords to retain the right to inspect the interior of their property upon giving the tenant proper notice 24 hours prior to the inspection. When you own your home, nobody is entitled to enter without your permission. It is your personal space on the planet that you have final say over. Your home is your private sanctuary for you and your family.

6. Freedom. Do you want to build a tree house in the backyard for your children? Would you like a volleyball net to use for weekend games with friends? Want to have a large 4^th of July celebration for 100 of your closest friends? Being a homeowner provides the freedom to do these things and virtually anything else that is legal to do. You do not have a landlord telling you what you cannot do. The freedom is priceless.

For aspiring home owners who find their goal stubbornly elusive, newly enacted legislation providing a tax credit of as much as $7,500 for first-time home buyers might just be the opportunity of a lifetime.

But like so many of the good things in life, time is of the essence for buyers who want to take advantage of this outstanding opportunity. Only homes purchased on or after April 9, 2008 and before July 1, 2009 are eligible.

First-Time Home Buyer Tax Credit at a Glance

• The tax credit is available for first-time home buyers only.
• The maximum credit amount is $7,500.
• The credit is available for homes purchased on or after April 9, 2008 and before
  July 1, 2009.
• Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.
• The tax credit works like an interest-free loan and must be repaid over a 15-year period.

If you would like more information please call me I'm here to help.

Aaron Gallagher

RE/MAX

217-649-6602

If you or anyone you know wants to protest your property taxes please email me. I have instructions and the form you need, but you'll have to hurry time is running out!! If you want to know the approximate value of your home please call me for a FREE market analysis. Autonotify is another great service I offer that can keep you up to date about the real estate where you live. The information you get is as up to date as what I get. Please let me know if you have any questions I'm always here to help..

Aaron --

217-373-4804

Ever since the Federal Reserve Bank announced yesterday they were going to take over Fannie and Freddie I've been looking for signs of good news. I came across an article in the MortgageNewsDaily that has one economist talking lower rates. Here is a little bit of what Brian Bethune, chief U.S. economist at Global Insight had to say, "The takeover will be bad news for existing shareholders but good news for American households: first-time homebuyers will benefit from lower mortgage rates, as will those who can refinance their mortgage. He said there is a "very high probability that 30-year fixed mortgage rates could move down to close to 6% within weeks, and possibly drop below that level by the end of 2008."

Bethune also said the deal makes the implicit guarantee of the government on GSE debt more explicit, and a result he expects to see a significant decline in GSE funding spreads.

"Our best guess is that funding spreads could drop by 40-50 basis points from average levels of about 80 basis points on 20-year debt in the past six weeks," he said, noting that a drop in mortgage rates should provide an affordability boost in addition to the declining prices seen over the past two years."

That's good news for buyers, seller, Realtors, bankers, insurance men, in fact it's going to be the shot in the arm our economy needs. Keep your eyes on my blog for further details and have a great day!!

Aaron