5 First-Time Homes to Avoid!

At Clocktower Realty, a big portion of what we do is help first-time buyers find the perfect home for them!  Every person has a different idea of what creates the perfect home, but if you’re the average first-time home buyer there are a lot more commonalities than differences!  Here are 5 choices that often plague first-timers making  the buying experience stressful.  As long as you can identify these pitfalls, it can narrow down the seemingly endless options, so you can make a more clear and informed decision on the best house for you!

The Fixer-Upper
This is an option that’s becoming more and more popular because let’s face it, we all think we can DIY.  That is - until a real problem comes up!  A lot of first-time buyers get enthusiastic about a great deal that needs “a little work.”  But don’t bite off more than you can chew.  If there are a couple repairs that can be done over the weekend then go for it, but a complete rehab might be going overboard and over budget.

The Goldilocks Effect
Buying for the future is something a lot of first timers think about when making their decision.  It’s one of the biggest purchases a person will make, and they want it to last a while.  However, many people run into the dilemma of finding something too big or too small.  Sacrificing space for a charming cottage home in a cute neighborhood may not fit your needs a year from now.  What do you use your one extra bedroom for?  An office, a guest room, for a growing family?  Then it becomes a battle of the uses.  But buying a five-bedroom is not necessarily the answer, either.  Confused space, too much maintenance and a higher mortgage aren't worth it.  Often times a three bedroom is the perfect compromise that will keep you comfortable for the years to come!

Chores Galore!
Having luscious landscaping and a giant green lawn packs some powerful curb appeal.  It looks amazing on all the online pictures you stalked on your iPhone in bed and really does impress onlookers.  Having a hot tub, a pool or a water feature are all very impressive as well, but they all of one thing in common— maintenance.  It is an extra expense, but where it will really cost you is your time!  If you don’t want to put up the weekend hours to maintain a tropical bungalow, move on.

The Investment Dream
While this ties in somewhat to "the fixer-upper," it’s more about expecting a return on those improvements you’ve made.  Don’t look at the investment potential, because chances are good your improvements won’t mean very much to future buyers.  Not only do housing trends change (i.e. Open floor plans haven’t always been in style) but there’s no way to tell where your market will be years down the road.  Make improvements for what fits your lifestyle now because you (or someone else) can always change it!

Too Good To Be True
It really hurts to say, but in Real Estate especially…if it’s too good to be true, then it probably is!  If you find a really good deal, do your research and then do it again!  Make sure to get a home inspection for the property if you’re seriously considering buying.  There may be a hidden, underlying problem that hasn’t been taken care of by previous owners.  Some of these things can be very serious like buried fuel oil tanks, asbestos siding issues, down to foundation problems that could amount to an unimaginable headache.  Another thing to consider is school districts, crime rates, etc.  There is a reason for the discount, and you don’t want to have to offer that extreme discount yourself when trying to resell.

Buying your first home doesn’t have to be so stressful.  While there are a lot of things to consider, it’s more manageable than it can seem especially with professionals in your corner.  Getting too emotional or only looking at numbers won’t ultimately lead you to the best first home for you, but a balance of the two.

2016 Outlook for Homebuyers

For first time home buyers, the market is primed and ready in 2016.  However, just like last year, mortgage rates are rising along with home prices.  While both aren’t expected to go up as rapidly as they did last year, new lending guidelines can make it harder to obtain certain loans for first time buyers.  So, during this time of year take extra care when filing your taxes if you plan on purchasing a home loan and strike while the iron is hot.  Don’t wait for rising prices to get into your new home!

An article from Daily Finance explains just how things are expected to change and how they might affect you. 

5 Things to Know About Buying a Home in 2016

The new year looks like it's shaping up to provide first-time buyers with the opportunity to enter into the housing market. Interest rates are still hovering around record lows, so there's some time left to snag a great deal. If you're planning on taking the plunge into homeownership in 2016, here are some key points to keep in the back of your mind before you begin the process.

1. Home Prices Are Expected to Even Out

Home prices have been on a steady upward climb over the past few years. But they're on track to level off in 2016. That's both good news and bad news for buyers, depending on what your financial situation looks like.

Home values are projected to increase by just 2.6% over the next year, according to Zillow. While that represents a slowdown from last year, values are still rising at a faster pace than wages. That means some lower income buyers may be shut out of the market if they can't afford to take on a mortgage.

2. Mortgage Rates May Go Up

A rise in the federal funds rate was seen as inevitable and the Federal Reserve finally moved forward with a rate hike at the end of 2015. For buyers, that move may signal the end of historically low mortgage rates, but it's not a reason to panic. It's likely that interest rates will climb up slightly but for the majority of buyers, it's not likely to be an obstacle to home affordability. Again, the buyers who stand to be affected the most are the ones who are on the lower end of the income scale.

3. FHA Loans Will Be Cheaper

FHA loans are a popular choice among first-time homebuyers because they make it possible to get a mortgage with as little as 3.5% down and a minimum credit score of 580. The only catch is that buyers who go this route are stuck paying an annual mortgage insurance premium (and an upfront mortgage insurance premium) on top of their regular loan payment.

The good news for 2016 is that the cost of the premiums are coming down. Last year, the Federal Housing Administration made a move to reduce the annual premium rate from 1.35% to 0.85%. For buyers who have their eye on an FHA loan, that represents a pretty substantial amount of savings when calculating their mortgage costs.

4. But Getting an FHA Loan May Be More Difficult

The FHA Handbook for 2015-16 introduced some new guidelines for lenders that may affect which buyers qualify for a loan. Some of the things covered in the updated rules include new documentation rules for gifted down payments and changes to the treatment of student loans when calculating debt-to-income ratios. Borrowers who have a high debt-to-income ratio and authorized users who are carrying credit card debt may find getting approved for a loan more challenging.

5. Buying Will Be Better Than Renting in Some Cities

The rental market has exploded in the last few years and rental rates have reached astronomical highs. That upward trend is expected to continue into 2016, and according to RealtyTrac, owning a home will be more affordable than renting in 58% of all U.S. housing markets. A spike in rental rates may push more buyers into the market, leading to increased competition over available homes.

Final Word

Even if you're planning to postpone buying a home until later in the year, it's not too early to start preparing for it. It's a good idea to start improving your credit, paying down debt and beefing up your down payment to make yourself as attractive as possible to lenders once you're ready to get a loan.

For the full article, written by Rebecca Lake, click here.

Image from Realtor.com

Grant Funds are Back!

Holiday Talk - Speaking of Investments

As you all probably know, I have been all over the place this month. Between hosting a client appreciation party last week, the Grand Illumination downtown and having a fabulous dinner with some our investors, I started reflecting on how lucky I am to be in this business. Not that many years ago Real Estate was one of the things that took a really big hit when the economy was doing not so great and it made a lot of people almost fearful of the idea of buying a house. People seemed to be a lot more careful with their money and investments.

There are still plenty of you out there that haven’t owned their first house, but honestly there isn’t really a better time than now to get one. The government and mortgage lenders are aware of these concerns in people’s minds and have started so many incentive programs for first time buyers. Between tax breaks and awesome rates, it really is a good time to become a homeowner, not to mention that the cost of homes is expected to rise within the next few years because of an increased number of well qualified customers.

Let’s back track a little bit though, so what about incentives? What are they exactly? Well there is a quite a few of them and over the course of the next few weeks I will be covering different points but here is the full list of them:

• Mortgage interest
• Points
• Real estate taxes
• Private Mortgage Insurance premiums
• Penalty-free IRA payouts for first-time buyers
• Home improvements
• Energy credits
• Tax-free profit on sale
• Home equity loans
• Adjusting your withholding

Let’s talk a little bit about Mortgage Interest Rates, they are at their lowest they have been since last summer. Partly due to the fact that it is winter and the season tends to be slower so banks and lenders tend to make it more attractive for buyers during the holiday season. This is good for buyers and investors and should be taken advantage of to its full extent.

Mortgage Interest can also be a tax deduction for some depending on income. An excerpt from TurboTax

"For most people, the biggest tax break from owning a home comes from deducting mortgage interest. You can deduct interest on up to $1 million of debt used to acquire or improve your home.

Your lender will send you Form 1098 in January listing the mortgage interest you paid during the previous year. That is the amount you deduct on Schedule A. Be sure the 1098 includes any interest you paid from the date you closed on the home to the end of that month. This amount is listed on your settlement sheet for the home purchase. You can deduct it even if the lender does not include it on the 1098. If you are in the 25 percent tax bracket, deducting the interest basically means Uncle Sam is paying 25 percent of it for you."

There’s no time like the present and if you’ve been sitting on the thought of making an investment, this may be the best opportunity for you to do so, especially if you are a first time homebuyer.

-Rhonda