Thinking of Buying Your First Home?

Thinking about purchasing a home of your own?


Keep these critical considerations in mind:


How long you plan to live in the home?


If you purchase a home and get a job transfer or decide to move after only a short time, you may end up paying money in order to sell it. The value of your home may not have appreciated enough to cover the costs that you paid to buy the home and the costs that it would take you to sell your home.The length of time that it will take to cover those costs depends on various economic factors in the area of the home. Most parts of the country have an average of 5% appreciation per year. In this case, you should plan to stay in your home at least 3-4 years to cover buying and selling costs. If the area you buy your home in experiences an economic up turn, the length of the time to cover these costs could be shortened, and the opposite is also true.


How long the home will meet your needs?


What features do you require in a home to satisfy your lifestyle now? Five years from now? Depending on how long you plan to stay in your home, you'll need to ensure that the home has the amenities that you'll need. For example, a two-bedroom dwelling may be perfect for a young couple with no children. However, if they start a family, they could quickly outgrow the space. Therefore, they should consider a home with room to grow. Could the basement be turned into a den and extra bedrooms? Could the attic be turned into a master suite? Having an idea of what you'll need will help you find a home that will satisfy you for years to come.


Your financial health - your credit and home affordability.


Is now the right time financially for you to buy a home? Would you rate your financial picture as healthy? Is your credit good? While you can always find a lender to lend you money, solid lenders are more skeptical if your credit history is not good. Generally, a couple of blemishes on a credit report will make you a good credit risk and could qualify you for the lowest interest rates. If you have more than a couple of blemishes on your report, lenders like Quicken Loans may still provide you with a loan, but you may just have to pay a higher interest rate and fees.


Some say that you should refrain from borrowing as much as you qualify for because it is wiser not to stretch your financial boundaries. The other school of thought says you should stretch to buy as much home as you can afford, because with regular pay raises and increased earning potential, the big payment today will seem like less of a payment tomorrow. This is a decision only you can make. Are you in a position where you expect to make more money soon? Would you rather be conservative and fairly certain that you can make your payment without stretching financially? Make sure that whatever you do, it's within your comfort zone.


To determine how much home you can afford, talk to a lender or go online and use a "home affordability" calculator. Good calculators will give you a range of what you may qualify for. Then call a lender. While some may say that the "28/36" rule applies, in today's home mortgage market, lenders are making loans customized to a particular person's situation. The "28/36" rule means that your monthly housing costs can't exceed 28 percent of your income and your total debt load can't exceed 36 percent of your total monthly income. Depending on your assets, credit history, job potential and other factors, lenders can push the ratios up to 40-60% or higher. While we're not advocating you purchase a home utilizing the higher ratios, its important for you to know your options.

Where the money for the transaction will come from?


Typically homebuyers will need some money for a down payment and closing costs. However, with today's broad range of loan options, having a lot of money saved for a down payment is not always necessary - if you can prove that you are a good financial risk to a lender. If your credit isn't stellar but you have managed to save 10-20% for a down payment, you will still appear to be a very good financial risk to a lender.

The ongoing costs of home ownership.


Maintenance, improvements, taxes and insurance are all costs that are added to a monthly house payment. If you buy a condominium, townhouse or in certain communities, a monthly homeowner's association fee might be required. If these additional costs are a concern, you can make choices to lower or avoid these fees. Be sure to make your realtor and your lender aware of your desire to limit these costs.

If you are still unsure if you should buy a home after making these considerations, you may want to consult with an accountant or financial planner to help you assess how a home purchase fits into your overall financial goals.


Call me today and we can chart a plan to home ownership that meets your needs and accomplishes your goals within a budget you can afford!




Tim Osborn, Broker - KY/OH/IN
The Property Pros, LLC
PH: (859) 803 - 5034
Email: tosborn@timothygosborn.com

Navigating the New FHA Appraisal Guidelines!

FHA has been and still is a mortgage choice for home borrower's and is often a preferred source of funding for lenders. Lenders reduce their risk of loss by issuing loans according to FHA guidelines as FHA loans are insured against default by the borrower.

Recently, new lending guidelines have changed the manner in which appraisals are being handled and now lenders are using third party vendors to assign appraisers versus ordering the appraisal direct with the appraiser as previously done in the past. The theory for this new method is to reduce the influence of the lender and/or other parties on the appraisal and home valuation process.

While the intentions of the new method is good, the reality of its implications are varied. Appraisers are now conditioning the properties more for clarification and further certification where items of disrepair, deferred maintenance or structural questions are noted as part of the appraisal inspection.

Often times buyers have home inspections done as part of the transaction. Sometimes the buyer has accepted the home inspector's view and assessment of the property, only to discover that the appraiser may have a differing point of view as to the condition of the home or the need of a repairs. The lender will have an underwriter review the appraisal and in most cases if the appraiser is concerned or notes an issue on the appraisal report, the underwriter will require it to be resolved as part of the loan approval - even when a home inspector has a less concern for the same issue. In the world of mortgage lending, the underwriter is the "KING" of this process.

Buyers and realtors alike need to be aware of these new challenges and how to effectively navigate resolving issues as they arise. Here are a few tips on how to deal with appraisal conditions on FHA participating loan programs:

#1 - Obtain clear and written direction from the underwriter identifying the problem and how they desire the problem to be addressed.

#2 - Address the problem in the manner suggested by the underwriter. Be thorough and provide a complete and full remedy complying with the undewriter's request on every point.

#3 - Undewriters are not negotiators. Too often an underwriter will review a borrower's request to "avoid" the remedy requested as "manipulating" the loan process and raise unneccessary concern. Get complete information and complete the information in the manner they desire - no more and no less.

#4 - Use qualified, licensed contractors to do repairs. Contractors need full resumes with references. Contractors will also need to complete the necessary lender's forms, provide proof of licensure, and evidence of appropriate liability insurances.

#5 - Employ patience and be thorough! Engage everyone in the process.

#6 - Allow yourself 45 - 60 days to close on your contract to purchase in case an appraisal issue would arise (especially in cases where the property has deferred maintenance or repair concerns).

#7 - Foreclosure properties or properties needing repairs may not be good for the traditional FHA program but may be best suited by the 203 K FHA Rehab loan program. Please refer to "My Links" for more information on 203 K FHA loans.