Bettina Settles, your Indiana Connection

More and more you can see signs in front of home asking you to "rent to own" or "lease to buy" this specific home. Now you are wondering if this is something for you?

Here is what you need to think of:

• You have an up-front fee called option fee that is a percentage of the agreed purchase price.
• When you as a buyer back out of the agreement or you might get evicted due to none payment, you might loose the option fee.
• When you are more then three times late with your "Rent" payment, you might loose your option money as well. Remember when you agree to a rent-to-own contract, you have to pay on time. No questions....!!!
• In a rent-to-own contract, you as the renter will be responsible for any repairs on the home; you do not have the landlord to fall back onto.
• In a rent-to-own contract, you have so many months (years) to buy the home. When you fail to provide property financing on time you also might loose your option money
• During the option period you can rebuild your credit
• A percentage of your monthly payment goes to paying the rent and the other part goes to building your down payment, that percentage is based on what you and the seller agreeing on in the option agreement.
• You are in a home compare to an apartment (not everybody likes to be in an apartment)
• You can plan, and you do not have to vacate or renew your lease each year.

One thing you need to keep in mind. The seller most likely can not afford to make both payments (the home you are leasing and their current home they are living in) and they do rely on you to make your payment on time. When you can not make the payment, they can not make theirs and the home might face foreclosure.

Especially this years home buyer has all kinds of incentives to buy their first home. Tax credits, low interest and a lot of inventory might be enticing to you to jump into your fist home.

Maybe you had a change in family status or just want to fly the coop and start your own life...but are you really ready?

Here is a small check list for you to find how ready you are really for the responsibility of homeownership.

Do you have money for a down payment and possible closing costs? In many cases you will need between 3-20% as a down payment. The Down payment is based many times either on the agreed value of the home you would like to buy or the mortgage amount you are taking out against the home.

When you have less then 20% you might need to have mortgage insurance also called Private Mortgage Insurance (PMI), the PMI can range between ½ to 1 percent of your principal balance.

You also need to take the closing costs into account and they could run you between 2-7% of the agreed property purchase price. Closing costs could include points, taxes, title insurance, cost for financing your loan and homeowners insurance. Homeowners insurance and taxes in many cases need to be escrowed for later payment.

Do you know how much you really can afford?

As a general rule and this comes from Freddie Mack, your dept to income ratio can be between 30-40%. This includes credit card bills, car loans, housing expenses, Insurance, personal loans, alimony and child support. Your house payment should not be more then 30% of your income to be comfortable. More then that might put you in a bind

Have you looked at your credit rating lately?

When buying a home a potential lender will pull your credit and look at your rating and your payment history. This will determine if and how much there are willing to lend to you, so you can buy a home. You have not looked at your rating in a while you might pull your own credit and see what is says about you.

Have made major purchases lately or taken out a large personal line of credit?

This alone can lower the amount of money a mortgage company might will lend you to buy a home and it might make it harder for you to get a mortgage.

How well do you know the area you would like to move to?

Have you done your research with the help of your REALTOR on what type and what homes are listed for and what they have been selling for in the last 6 months? When you looking for a big home in an area where only smaller homes are selling you might have to get back to the drawing board and familiarize you more with the area.

Are you ready for the additional expenses that comes this homeownership?

Have you thought off that you will need to cover sooner or later insurance, utility bills, and maintenance for the home. Maintenance that could include a broken heater, leaking roof, or pluming.

Have you thought of why you want to buy a home

Homeownership is a lifetime commitment and should not be decided over night. Just remember that you are facing expenses other then when you renting a home, or is the reason for you to buy a home because your friends just bought one? When it is, you might consider waiting and still rent for a while.

Have you settles down?

Are you planning on moving any time soon? Or do you might think of changing your job or a transfer? Then homeownership might not be a thing for you right now.

Renting still has it's perks and homeownership does have obligations are you ready to face them?

Do you have an apartment with amenities like an alarm system, pool, hot tub, tennis court and maybe a workout room? Will you miss theses amenities, or when you buy a home with these? Are you ready for the weekly/monthly maintenance that comes with the amenities? You have a maintenance guy you can call when your faucet is dripping, the heater filter, smoke alarm batteries, or broken furnace needs attention. Are you ready to face all those yourself or call a contractor to help you with the issues that will come up when owning a home?

Have you contacted a REALTOR?

Talk to several agent that are in the area, ask friends, family and co workers for referrals. Interview each agent before you make your decision. It is important that the agents personal style will be a good fit with yours.

So...with the new $8,000 tax credit you now want to buy your first home. Did you know you might can use the $8,000 before you file for taxes? There is a catch and here is where you can find out.

As buyer you have rights as well as responsibilities before you even become a homeowner. HUD has put together a very nice brochure called BUYING A HOME that explains the settlement costs and gives you other helpful information about buying a home. With the BUYING A HOME brochure it give you also a line by line explanation on how to read a HUD-1 or the Final Settlement Statement.

When you apply for a loan, you might hear the word RESPA.

RESPA is the Real Estate Settlement Procedures Act. It is as well called truth in lending, and mortgage reform that will help consumers to shop for the lowest cost mortgage and avoid costly and potentially harmful loan offers. The mortgage lender or broker needs to give you, as a buyer a GFE (good faith estimate)that has to be in writing and has to be delivered to you with in three business days after you made the loan application.

Each State has different rules and laws that govern the home buying process and to understand the buying process a little bit better, familiarize yourself with a purchase agreement as soon as you can. Ask your REALTOR to give you a copy of the agreement, so that you can read and ask about the fine print before you sign the dotted line.

Besides the purchase agreement, you have to fill out or look at other information that is part of buying a home and it varies from State to State. Some examples are Sellers Disclosure, and lead base paint disclosure for home build before 1978.

For more information about buying your first home, give us a call.

Bettina Settles

Written by Bettina Settles 06/01/2009 ©

As a Real Estate investor you might have heard about a 1031 Exchange.

What is a 1031 exchange?

1031 exchange is actually named after Section 1031 of the Internal Revenue Code and was created for tax deferred investing. YES tax deferred NOT tax FREE.

The reason for the creation was, to give Real Estate investors a chance to reinvest their gain into another like kind investment. When the replacement property is eventually sold and not part of another 1031 exchange the taxes will have to be paid at that time.

The 1031 has qualification that have to be met, for instance

• net proceeds in an 1031 exchange need to be reinvested into the replacement property
• there is a limited time frame for purchasing the replacement property
• the net proceeds of the sold property need to be held by a Qualified Intermediary or third party and
• the Qualified Intermediary can not be a advisor of any kind to the Investor, like there attorney, Real estate Agent, financial advisor.
• Property can not be used for personal reason of any kind

When you would like to find out more about a 1031 Exchange or any other type of Real Estate investing, please contact us.

Written by Bettina Settles 06/02/2009 ©

Attention pool players, on June the 27^th 2009 there will be a fundraiser to help raise money for Eva Finchum and her transplant fund.

The fundraiser will be held at the

Location: Brickyard Billiards

Street: 6445 W. Washington St

City/Town: Indianapolis, IN

Date: June 27^th 2009

Time: 10 am to who knows what time

We play both 8 and 9 ball

Here is the flier for more information on rules and entry fee.

You also can find more information on www.Indybca.com or Facebook

We also have a raffle during the tourney for great Items that where donated.