Understanding your Home Purchase!

Just press play! You may want to keep the cursor on the pause button as it plays a bit fast.

So you want to buy your first home.... How much can you Afford?

So you want to buy your first home but don't know where to start... The first thought that comes to mind for many first time buyers is to jump on the internet and start looking at what's available.
"How much can I afford?"
This is probably the first and most important question you should ask yourself.
"How do I figure that out?"
Call a loan officer is my advice!
"But I don't want to call a loan officer; I heard it could affect my credit!"
If this sounds like you then read on. Loans now days are issued on DTI or Debt to Income Ratios coupled with your Credit Rating.
"What's a DTI?"
Debt to income is exactly that. How much you are obligated to pay divided by how much you bring home pre-tax.
For instance, You make $2,400 per month, but you are obligated to pay $500 per month on minimum balances due on your credit card, car loan, etc. In this situation your DTI would be 500/2400= 20%.
***Only the balanaces reflected on your credit report need be used to figure your DTI: cable bill, gas bill, and electric need not be figured in!***

The next step is a bit more complicated. I am going to adding more to this self-qualifying in the near future so keep in touch....

New Year's Resolution for First Time Homebuyers

How many of you have told yourself that this was the last year you where going to rent?



How many of you are renewing your lease yet again?



Don't you think it's about time to stop thinking; and finally make the moves?



How many excuses can we find to keep paying rent?



I come in contact with many people in many different situations. Some have crappy credit to put it lightly. Others are of the 80/20 nature; meaning one of them has 80 percent of the credit and the other has the other 20, etc. Some are so well qualified that they assume anytime is a good time. There is a good number of young couples that are looking to stop wasting their money on their landlords mortgage; and putting that towards something better. What and how? Let me tell you about this scenario from just the other day...



There was a young couple New Year's day I ran into. It was kinda cold and they where looking for a place close to Decker lake and not far from Down Town. There is a little subdivision in the North East called Sendero Hills that was perfect. Take MLK East past 183 & you will see 969 on the left hill after the RR tracks. Sendero Hills is behind the awesome Agave homes on the hill overlooking Down Town. I showed them the house they wanted to see and a different home that I had listed on the same street. I was still a little shook from the New Year's the night before; but they were understanding. I showed them a great place, but we were not sure if his boat would fit in the garage, not to mention the grade up to the garage was steeeeeep!

They were talking about buying later and then I asked them "Why don't you both lease to purchase?" I explained to them that even if they were not married it was just a lease with an option. So it wouldn't be any worse than a normal lease. I'm glad I was able to give this couple a bit of insight as to how to convert your rent into a down payment!

Now think about your situation. If you are thinking about buying a home and on the fence; it would be wise to consider this:

If you pay $1000 a month in rent; then you pay $12,000 a year. Perhaps you ask for 50% of each months rent to be credited towards the purchase of the property. When? 1 to 5 years. At the end of 1 year you will have $6000 of YOUR rent that counts towards the purchase of YOUR new home. Many investors prefer this method over traditional market sales. They get tenants that care about the condition of the property and treat it like a home! When you close you ask the seller pay for a 1 year home warranty after you close! If you are fortunate enough to find someone that is willing to do this then do it! You are going to pay to live somewhere! Even if it's not what you "dream" about you can at least put your money to work for you.

So make Home Buying a resolution this year! I am and I'll keep you posted on my adventure.

First Time Home Blogging

If you are in the market for a home and have never owned one before then you have come to the right place! There are many different things that you have to stay abreast about in order to get the best possible deal. Right now FHA regulations are changing! There is legislation that is currently pending to allow buyers to put down a mere 1.5% at closing in order to get a home. If you think about it that's only $1500 for every $100,000 dollars. Currently it's 3% (about $3000) for every $100k. If you don't have it, don't stop reading: there are other ways to account for the 3%.

If you are a true first time home buyer then there is a dream rule that I impose on all of my first time clients. YOUR FIRST HOME WILL NOT BE YOUR DREAM HOME!

Many people hear that and are immediately disenchanted with owning a home. The truth is that the average person can't go out and qualify for a dream home, so a shake my imaginary client in the friendliest way and tell them to stop dreaming! Instead let's focus on the positive possibilities.

For instance, your first home should be a place that not only "feels homey" but is affordable. Many first time home buyers go out and max out the credit that is afforded to them through a lender. Don't be that person! Instead take the number given to you from your pre-qualification letter and discount it by about $20k, this will save you at least $100 per month based on today's interest rate. I call this the fudge factor.

What's a fudge factor? The easiest way to describe A Fudge Factor is with this thought: "I don't know what tomorrow brings so I had better plan something for it just in case!"

Next, you will have to cough up about $400 for an appraisal fee, $100 for an option fee, $300 for an inspection and $500-$1000 for an Earnest Money Deposit.

Blog Reader: What's an appraisal for and why do I have to pay for it?"

Paul: It's a third parties opinion of the value of the home. Loans are based on appraisals, so you have to pay for it!

Blog Reader: "What's an option fee and why do I have to pay for it?"

Paul: An option fee is exactly that, an option. An option to do what you ask? An option to have a home inspector come in and tell us what's wrong or not wrong with the property. Like I said, this is an option, but I highly suggest you obtain this. Some inspection companies will wait until closing to get paid on inspections. Ask me which ones when we write an offer and I'll tell you!