Buy....Don' Buy.....Geesh!.......What Am I To Do?
Buy...don't buy.....buy....don't buy! For many people this question can be like a chronic medical condition (one that lingers or is recurring). As a prospective homebuyer (first-time or otherwise) don't feel like you are the Lone Ranger in pondering your decision! This is a question that ultimately creeps up for everyone in the early stages of contemplating a home purchase.
First and foremost you will probably have a host of friends and relatives that will be more than willing to lend you their advice with a wide variety of opinions. Quite often all of these varying opinions will create a morass(a confusing glob of nothing that is discernable). You get the advice of yes...go for it and the No's,...wait a while because home prices will go even lower...or No..Wait...mortgage rates will come down. Wait 3 months...no..wait 6 more months!
I will suggest to you that the worst thing that you can do is to arrive at your decision (buy...don't buy) strictly on the recommendations of friends and/or family. Don't misunderstand me...I am in no way stating that their recommendations, be they right, wrong or indifferent, are not important to your decision making process. However, more due diligence is required!
Any decision to purchase a home must not be taken lightly or undertaken in a haphazard manner as this is one of the most important decisions that you can make within your lifetime....it is a life event! As such I want to draw a contrast to the chronic medical condition previously mentioned.
If you are experiencing a chronic medical condition you are not going to rely solely on the opinions/recommendations of friends or family to deal with your problem.....you are going to seek expert medical advice and treatment! In pondering your decision on whether or not to purchase you need to seek information, guidance and opinions of real estate and mortgage professionals as part of your decision making process. You cannot arrive at an informed and prudent decision without doing this!
Bluntly and in my opinion, trying to arrive at an informed decision without professional assistance is like trying to find a solution to a mathematical equation with part of the numbers missing. Like the old saying...junk in....junk out!
Don't know any professionals....no problem...seek referrals from family and friends that have had a good experience with both of the above. Of course, you always have the option of contacting me.
Regardless of your decision to either delay or move forward with a home purchase, if you are committed to completing a purchase now, in 3 or 6 months or longer, you need to get yourself on the path to homeownership.....plan for your purchase and work your plan.
Start a project notebook and your research..keep copious notes! Start doing your homework on the real estate market in your area, prices, trends, taxes, mortgage programs/rates, affordable housing programs, neighborhoods and much more. Form your questions (bullet points) for discussion for both the real estate and mortgage professional. Don't know what to ask...research websites that provide good information related to buying a home...there are plenty of these. Likewise you might wish to read some of my previous blogs that may prove helpful in your research. Here are a few:
•· Down Payment Assistance for First-time Homebuyers
•· Homebuyers Tips-Do's and Don'ts
•· The Truth About Credit Reports/Credit Inquiries and Credit Scores
•· Homebuyers.....FHA Allows You to Have Your Cake and Eat It Too!
Speak with at least 2 or 3 professionals each, both real estate and mortgage. Ask the same questions of all. A good tip.....ask a few questions that you already know the answer to! You will probably shorten your list quickly based on their answers or responses and your gut instincts about their knowledge, integrity, and professional demeanor.
You might consider enrolling in a first-time homebuyer education program as these are well worth the time and effort regardless whether you purchase now or later.
Given the present circumstances of real estate values falling and the turmoil in the financial markets you will probably find yourself second guessing any decision that you arrive at. Currently home prices are trending downward in most areas while some areas remain more stable than others. Mortgage interest rates are at or near historic lows. What you must know or understand is that no one can predict with absolute certainly what future trends or changes will take place. Home prices will trend one way or another over an extended period of time. However, home values have historically increased (year over year). For most people homeownership over the long term is the primary means of establishing their personal wealth!
For many homebuyers, present market circumstances will probably lead them to considering the purchase a home as a result of a short sale or foreclosures. Obviously there are some great buys in the market place but you should be aware that there can be an increased opportunity for encountering problems. As such, if you plan on purchasing a home subject to a short sale or foreclosure I would highly recommend that you find a real estate professional that is very experienced in this market as many of these homes present additional challenges. Pay close attention to the property condition as quite often these properties will be offered in an "AS-IS" condition. Additionally, I would highly recommend that your purchase be subject to a "whole house property inspection". Frequently, the financial circumstances of the sellers has prevented them from performing routine maintenance or needed repairs. Remember that "An Ounce of Prevention is Worth a Pound of Cure"!
For those prospective homebuyers that find there are obstacles in your path such as financial capacity, adverse credit issues, employment circumstances, etc., you must treat these as temporary "show stoppers". They can be overcome over some period of time with guidance, planning, effort and commitment. Try to find a loan officer that is very experienced, knowledgeable and willing to guide and communicate with you over whatever period of time will be required to complete your home purchase.
In pondering the question of buy now or don't buy it would be my opinion that if you envisioned living in your home for a shorter term of 1 or 2 years that it would probably be best to postpone any purchase and see what direction the housing market takes.
If you envision staying in your home for an extended time period or the foreseeable future then more often than not my recommendation would be....go for it! What you may be able to qualify for now may not be available down the road or your personal circumstances could change making a mortgage approval more difficult. The mortgage industry has undergone dramatic changes over the past two years and it is most likely that qualification criteria will continue to become more restrictive as we navigate through the problems in our financial markets.
As I mentioned previously, homeownership is the primary means for building wealth. As such, the sooner you can achieve homeownership the better you will build your wealth or the long term. As a renter you get nothing in return for this investment, zero, nada, zilch! Your accumulated rent costs over a period of several years can be thousands of dollars and the only person you are making wealthy is your landlord. Renting is hazardous to your wealth!
To give you a visual realization of rent dollars paid out over various time frames you can use the table to see just how much of your hard earned income is not being used to invest in your future.
|
MONTHLY RENT |
AFTER 3 YEARS |
AFTER 4 YEARS |
AFTER 5 YEARS |
AFTER 6 YEARS |
|
$500
|
$18,000 |
$24,000 |
$30,000 |
$36,000 |
|
$550
|
$19,800 |
$26,400 |
$33,000 |
$39,600 |
|
$600
|
$21,600 |
$28,800 |
$36,000 |
$43,200
|
|
$650
|
$23,400 |
$31,200 |
$39,000 |
$46,800 |
|
$700
|
$25,200 |
$33,600 |
$42,000 |
$50,400 |
|
$750
|
$27,000 |
$36,000 |
$45,000 |
$54,000 |
|
$800
|
$28,800 |
$38,400 |
$48,000 |
$57,600
|
|
$850
|
$30,600 |
$40,800 |
$51,000 |
$61,200
|
|
$900
|
$32,400 |
$43,200 |
$54,000 |
$64,800 |
|
$950
|
$34,200 |
$45,600 |
$57,000 |
$68,400 |
|
$1000
|
$36,000 |
$48,000 |
$60,000 |
$72,600 |
Visit me at www.ronwithers.com or www.myfloridamortgagepro.com or Town & Country Mortgage
Best wishes and good luck in your homebuying experience!
Copyright 2009, Ron Withers, All Rights Reserved.
As of December 23, 2008 Florida Housing Finance Corporation (FHFC) or Florida Housing still has in access of $50 million available between their 2008 Series 3 and 4 Mortgage Revenue Bond Issue for mortgage finanacing and down payment assistance (DPA) up to $10,000 subject to borrowers eligibility.
If you are seeking DPA funds to help make your home purchase attainable or affordable the Florida Housing program presents a higher probability of assistance when compared to local SHIP programs. Most of the local SHIP programs have already closed their application period or exhausted their available funds.
Florida Housing remains committed to the continous availability of funds. Home prices are down and with $10,000 in assistance you may be able to complete your home purchase with very little out of pocket funds.
Visit me at www.ronwithers.com or www.myfloridamortgagepro.com
*Program information provided below is updated as of 12/19/2008 as a result of my attendance at a Partnership Update Meeting on 12/16/2008. Program criteria is to become effective as of 1/1/2009.
Osceola Human Services administers the SHIP program for the City of Kissimmee and Osceola County. Maximum purchase price in Osceola County will be $180,000 and $240,000 in the City of Kissimmee.
Assistance amounts in each level of household income have been considerably reduced (see below). Qualifying housing/debt ratios cannot exceed 30/41% respectively. Unpaid collections or judgments are not permitted with the exception that medically related collections may be allowed. Going forward all lending partners/loan officers must be a participating lender with the Florida Housing Finance Corporation (Florida Housing) to participate in the SHIP program.
**The SHIP Down-Payment Assistance Application period will begin promptly at 8am on Monday January, 12, 2009. The application period may only be open for a matter of a few days based on level of demand. In order to obtain an application for assistance applicants must present their:
Applications for down payment assistance will be provided to applicants when the above documentation requirements are met. Application may be completed on site or taken and returned later, however since this assistance is first-come, first-served I would suggest that you complete and turn in your application immediately.
The Osceola County housing assistance program is designed to make affordable housing available to citizens with an income that is classified as moderate or lower. The number of moderate funding is limited to funding restrictions.
The State Housing Initiatives Partnership (S.H.I.P.) program provides funding to local governments to assist citizens to become homeowners. Eligible first-time homebuyers will receive financial assistance to help with the costs of buying a home. For more information on this program, please click here.
S.H.I.P. partners in Osceola County include lending institutions, housing developers, community based housing, service organizations and affordable housing professionals. Applications are processed on a first-come, first ready, first served basis.
Maximum financial assistance is based on 120% of area median income adjusted for size of household. While there are set levels for maximum assistance, the maximum assistance received may be subject to gap considerations or in other words that amount of assistance that may be required to make the borrowers financing affordable/meet the agencies requirement for maximum allowable ratios for housing expense and total debt to income ratios. The maximum assistance base on income category is as follows:
To further clarify the "up to" amounts in each income category Osceola Human Services has a policy of providing "gap financing or assistance." This means that the agency may only approve a level of down payment assistance within the qualifying income categroy which will allow the borrower to qualify up to an amount which keeps them eligible for their maximum qualifying housing and debt to income ratios.
S.H.I.P. Loan Terms:
Homebuyer Education Requirements:
Visit me at www.ronwithers.com or www.myfloridamortgagepro.com
With the legislative elimination of Seller Funders Down Payment Assistance (SFDPA) programs on October 1, 2008 homebuyers seeking financial assistance are basically left to compete for DPA funds from either the State Housing Initiative's Partnership (S.H.I.P) programs administered by local or county housing agencies or the State Mortgage Revenue Bond program administered by the Florida Housing Finance Corp (FHFC) or Florida Housing.
Most of the local/county housing agencies have very liberal DPA programs in comparison to up to $10,000 from FHFC MRB program. For example:
• City of Orlando/Orange County, Fl., up to $30 and $35,000, respectively.
• Osceola County, Fl., up to $69,900.
• Seminole County, Fl., up to $80,000.
It is understandable that homebuyers seeking DPA funds would want to obtain the maximum assistance that would be available to them. As such, the local/county housing agencies are flooded with requests or DPA applications when the announcement of availability of funds is made public. However, at the end of the day, this is like trying to store 100 gallons of water in one 5 gallon bucket.
Each local/county housing agency is mandated to spread their allocation of S.H.I.P. funds dis-proportionately across 3 levels of household income categories; very low, low and moderate. As an example to further illustrate the point that I am trying to make, Osceola County has just over $800,000 allocated for the 2008-2009 budget. Assistance per applicant, depending on income level, ranges from $39,900 to $69,900 (very low income). In the allocation of all funds across the 3 levels the very low income category receives a larger percentage of the total funds available. In my best guesstimate Osceola County can only fund 15-20 homebuyers with DPA. Osceola County requires that applicants complete their homebuyer education course for which they hold numerous classes for. Their seating capacity for each class is approximately 150 people. They are always 100% reserved with many being turned away.
To further exacerbate the DPA application process there is a trend among many of the local housing agencies to open DPA applications to a very short window of opportunity (usually 30 days or less). Once this window is closed then applicants are shut out for another year. This cyclic period kills the DPA opportunity for most DPA applicants.
So in reality, if a homebuyer is eligible for DPA then the ability to obtain financial assistance largely in part boils down to plain old-fashioned luck! Similar constraints exist in most of the local/county S.H.I.P programs.
With all this being said my recommendation to homebuyers seeking DPA is to consider resigning themselves to applying for DPA via the State MRB program to save a lot of disappointment or frustration. Granted that up to $10,000 in financial assistance seems rather paltry in comparison to the higher amounts of S.H.I.P program funds, however if they can make affordability work for them then the end may justify the means.
FHA and USDA Rural Housing have emerged as the predominate mortgage financing products for homebuyers. FHA effective January 2009 requires a 3.5% investment while USDA remains at 100% financing. As such, the $10,000 DPA from Florida Housing can translate into to a purchase of as much as a $200,000+ purchase price if payment affordability can be achieved. This $10,000 may be used to cover down payment and/or closing costs. Given the nature of the present housing market homes can now be purchased in the low $100's and more often than not, seller's concessions can be negotiated for payment of closing costs.
If a prospective homebuyer needs DPA funds and is still personally committed to obtaining S.H.I.P funds, I would further recommend that they consider placing themselves on a 1 to 3 year orchestrated game plan in concert with their loan officer to achieve this. Planning and timing is everything! Again, along with some "luck". Otherwise, go the route of State MRB program. Florida Housing remains committed to continuous funding!
Copyright 2008, Ron Withers, All Rights Reserved.
Over the years Florida Housing's Mortgage Revenue Bond (MRB) program has provided billions of dollars and helped thousands of Floridians achieve homeownership! Virtually every aspect of our housing finance or mortgage market is now feeling the ongoing and deepening impact of our "credit crunch" with no immunity spared to any agency or program.
With the recent elimination of Seller Funded Down Payment Assistance (SFDPA) programs, State and Local bond programs are the only source of down payment assistance in many areas. While Florida Housing has had an ongoing commitment to provide continuous funding this commitment is facing serious challenges as none of the new bond programs have been able to begin as there are no buyers/investors for these bonds.
For most of the 2000's, Fannie Mae and Freddie Mac were the major or only buyers of mortgage revenue bonds. That is no longer true. They aren't buying and there are no other investors.
I received an email today from a Florida Housing agency representative requesting all concerned parties to communicate to our congressional representatives the need for their support to keep the State MRB/DPA functioning in its' mission. Whether you may be a consumer, a first-time homebuyer, a loan officer, Realtor or Builder your voice is important. Below is sample language that you can copy and paste into your email to facilitate your voice being heard.
Please contact your voices in Washington -- your senators and representatives.
Here's how to email them:
U S Senate
http://www.senate.gov/general/contact_information/senators_cfm.cfm
U S Congress
https://forms.house.gov/wyr/welcome.shtml
On this site, find your rep then go to their website for their email address
Thanks for your help!
Sample Language
July's Economic Stimulus Bill contains roles for the country's Housing Finance Agencies (HFA's). These agencies rely on the sale of tax exempt mortgage revenue bonds to create dollars to purchase mortgages from lenders. For the past several years, Fannie Mae and Freddie Mac purchased these bonds. These are not subprime mortgages as borrowers actually qualify under standard credit underwriting requirements.
Currently, there are no investors. Please contact the conservator and advocate for Fannie Mae's and Freddie Mac's ability to purchase mortgage revenue bonds. Governments receiving Neighborhood Stabilization funds are anxious to work with HFA's leveraging resources to save neighborhoods. It is particularly important that this happen as quickly as possible to move inventory before another very large cycle of foreclosures occurs in the spring. Spring foreclosures will send home values on another downward spiral.
Mortgage revenue bonds programs are particularly important as so many down payment assistance programs are no longer available. Lending institutions are utilizing funds that were made available prior to the AIG crisis. When those funds are gone, new programs will be on hold until there are investors.
Your help is the hope for borrowers, sellers, lenders, Realtors and builders.
Thank you for your kind assistance.
_____ your name and
______ your profession
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