5 Foolish Mistakes First-Time Home Buyers Make

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Buying a home is exciting, especially when you’re buying for the first time. In the midst of all of the excitement, it’s easy to become blinded by beautiful back-splashes, granite and quartz counter tops, hardwood floors, and fenced-in backyards. While looking at homes that are completely perfect from top to bottom, you may begin to rationalize a larger purchase than you had originally planned for — “This house is perfect for me; it’s worth $50,000 extra dollars for me to have a house with enough space in a perfect location,” or “We were planning on spending a little bit of money on painting; we can spend $50,000 extra on this house because it doesn’t need any work.” These are some common mistakes first-time homebuyers often make – so be careful to avoid them if you are about to buy your first home.

1. Overspending

Before you even look at a single property, you need to know exactly how much you can afford. We have several online financial calculators you can use, but these tools are only estimates. Use these tools as a guide, but then adjust the amount based on your individual situation. How much is your current rent payment? Did you meet that payment each month with ease, or was it a bit of a struggle each month? The payment you can afford right now is a good indicator of what you’ll be able to afford in your new home.

Meet with a lender and get pre-approved for an amount you can afford. Also, keep in mind that it’s always better to lean towards a lower amount, rather than a higher amount. You do not have to use the entire amount you’re pre-approved for. Once you know how much you have to work with, then and only then should you start your house hunt.

2. Counting chickens before they hatch.

When determining how much mortgage you can afford, base this amount on what you are earning today. That is, the income that you and your spouse earn from stable sources. If you’re in your last year of law school, for instance, don’t assume that you will be earning much more money in a year or two, so you can afford a larger payment. If your wife is expecting a big promotion, don’t base your mortgage payment off of her potential salary increase. No one can predict the future, and although you may very well be in a better financial situation a year down the road, there is no guarantee.

3. Failing to account for closing costs, property taxes, HOA, and homeowner’s insurance.

When you rent a home, you generally only have one payment — rent — and then maybe renter’s insurance, which is optional. When you buy a place, your mortgage payment is only the beginning of an array of costs. Homeowner’s association fees can be as low as $0 or as high as a few hundred dollars per month, depending on where you live and the amenities and services offered.

Homeowners insurance and property taxes very based on your geographic location. Florida has notoriously high homeowner’s insurance rates, where they average $161.08 per month. In Idaho and Wisconsin, rates are a bit lower, averaging below $50 per month, according to Value Penguin. Property taxes average higher in New Jersey, New Hampshire, Texas and Wisconsin and they’re lower in Louisiana, Hawaii, and Alabama.

Then on top of all of those costs, if your down payment is less than 20 percent of the selling price, you may end up paying an additional cost — private mortgage insurance (PMI) — which is basically insurance for the lender in case you default on your loan. At the end of it all, your $800 mortgage payment can easily turn into a $1,200 house payment.

4. Failing to protect yourself with home inspections, contingency clauses, etc.

During your house hunt, you may find a house that looks great at first glance. Then, as you walk through a few of the rooms, you notice problems with the house — maybe the floors squeak or the kitchen island is off-centered. After walking through the house, you come to realize that someone simply put lipstick on a pig, and this house is in questionable shape.

Home inspections provide you with some protection. The inspector will be able to find problems that you can’t and you want to know these problems before you sign on. “The seller isn’t likely to tell you there’s mold in the basement or the walls are poorly insulated,” reports MSN.

Contingency clauses also offer a form of protection. “A mortgage financing contingency clause protects you if, say, you lose your job and the loan falls through or the appraisal price comes in over the purchase price. Should one of these events occur, the buyer gets back the money used to secure the property. Without the clause, the buyer can lose that money and still be obligated to buy the house,” explains Justin Lopatin, a mortgage planner with American Street Mortgage Co.

5. Being too naive or too paranoid.

Some first-time home buyers are naive. Overly optimistic, they think nothing could possibly go wrong. If a home has a few problems, they view them as easy fixes and are unrealistic when it comes to the cost and time it takes to fix up the home. Some naive buyers will move to a neighborhood on the wrong side of town, forgetting that you can fix up a house, but you can’t change your neighborhood or location without moving.

Paranoid buyers can be difficult to work with. They may not believe the price is an accurate assessment of the house’s market value. They may submit low offers which can be consistently rejected. Paranoid buyers may not trust real-estate agents, and may even try to buy their home without an agent, which is generally an unwise choice.

Stop into any First Financial branch and we can help you with your home buying journey. We provide great low rates and offer a variety of Mortgage options - to speak with First Financial’s lending department, call us at 866.750.0100 option 4.* 

To receive updates on our low mortgage rates straight to your mobile phone, text FIRSTRATE to 69302 and each time our mortgage rates change, we’ll send you a text message with the new rates.** We’re here to help you achieve your financial dreams!

*A First Financial membership is required to obtain a mortgage and is open to anyone who lives, works, worships, or attends school in Monmouth or Ocean Counties. Subject to credit approval. Credit worthiness determines your APR. **Standard text messaging and data rates may apply.

Original article source by Erika Rawes of Wall St. Cheat Sheet.

 

The Hidden Costs of Buying a Home

American home with three car garageYou’re looking for a house and see the perfect listing. And it has a big number on it, say $300,000. If you’re like most prospective homeowners, you imagine you will soon be talking to a lender and getting a loan for this amount.

But as veteran homebuyers may already know, you are going to pay much more than $300,000.

Yes, almost everything we buy has a hidden cost. You buy a toothbrush for a few dollars, and since you’ll have to purchase toothpaste, the ownership cost of a toothbrush is more than $2 – especially if you throw in a toothbrush holder. Obviously, the hidden costs of buying a house are far more complex. And if you aren’t prepared for them, you may come away from the experience feeling as if you’ve had the wind knocked out of you.

So if you’re thinking of buying your first house, be alert and prepared for these hidden costs that you need to keep in mind:

Home inspection costs. Before you close on a house, your mortgage insurer may require a home inspection, which can run several hundred dollars. But even if an inspection is not required, it’s worth paying a professional to evaluate the house so you can avoid spending hundreds of thousands on a train wreck disguised as a house.

Survey costs. Your lender may want you to have a professional survey of the property, so everyone knows exactly where your land’s boundaries are. That’s another several hundred dollars.

Taxes. You probably know you’re going to be paying taxes, but it can be easy to forget that you’ll likely need to pre-pay those taxes at closing. At the beginning of your mortgage, it can be a shock when you’re saddled with paying a couple months’ worth of property taxes, maybe a year’s worth of homeowner’s insurance, and possibly homeowner’s association dues as well.

Fees. Maclyn Clouse, a finance professor at the Reiman School of Finance at the University of Denver, rattles off a list of fees you may also pay at closing:

  • Government recording charges: The cost for state and local governments to record your deed, mortgage, and loan documents.
  • Appraisal fee: The cost for an appraiser to decide how much your house is worth.
  • Credit report fee: Your lender had to pay to get your credit report, so oftentimes you will cover that cost.
  • Title services and lender’s title insurance: Fees related to your home’s title.
  • Flood life of the loan fee: The government tracks changes in your property’s flood zone status, you’ll pay a small fee.
  • Tax service fee: Another pretty minor fee – this service ensures the taxes previously paid on the house are up to date (if your home was previously owned).
  • Lender’s origination fee: The charge for processing your loan application.

Moving costs. Will you be gathering friends and family to help you move your furniture and possessions into your home, or do you need a moving truck? Don’t forget about the cost of movers, if you are hiring them.

Total cost of ownership. Someone will have to mow the lawn with the mower you’re fated to buy, or you’ll hire a service. You’ll also probably need furniture and maybe a major appliance, like a washing machine. Even paint and paint supplies costs money and adds up quicker than you think.

Be ready for anything. Some houses (previously owned) come with propane or oil tanks, and at closing buyers have been asked to reimburse the sellers for the fuel remaining in the tank – in certain cases.

Looking for a mortgage? Check out First Financial’s mortgages, featuring great rates and low fees.

Rates as low as 3.375% (3.651% APR) – 15 Years.* A 15 year mortgage of $100,000 at 3.651% APR would have a monthly payment** amount of $708.76.

Rates as low as 4.375% (4.541% APR) – 30 Years.* A 30 year mortgage of $100,000 at 4.541% APR would have a monthly payment** amount of $499.29.

We also have a 10 year mortgage as well – great for refinancing! Learn more here, and apply online today.

First Financial also offers a Mortgage Rate Text Messaging Service so you can receive updates on our low Mortgage Rates straight to your mobile phone. To be a part of the program, text FIRSTRATE to 69302 and each time our Mortgage Rates change, we’ll send you a text message with the new rates.***

*APR = Annual Percentage Rate. Subject to credit approval.  Credit worthiness determines your APR. Available on primary residence only. A First Financial membership is required to obtain a mortgage and is open to anyone who lives, works, worships, or attends school in Monmouth or Ocean Counties.  See Credit Union for details.

**Payment examples do not include taxes or insurance. Financing up to 80% of value of property.

***Standard text messaging and data rates may apply.

Article Source – Geoff Williams of Money.USNews.com: http://money.usnews.com/money/personal-finance/articles/2014/03/12/the-hidden-costs-of-buying-a-home

Learn About Home Buying, Improvement, and Insurance at this Seminar in March 2014

sold-homeThere are a lot of uncertainties that arise when it comes to buying, selling or renovating a home: if the market is right, how to choose a realtor, how much to budget for, home insurance, and improvement project costs, are just a few of them. You don’t want to miss this opportunity to gain insight on the best way to move forward with your home buying/selling process.

At our upcoming consumer seminar, attendees will learn:

  • How to go about buying a new home and the best way to sell your current home.
  • How to figure out how much house you can afford.
  • Budgeting tips for home improvement projects.
  • Features and benefits of home insurance.
  • And so much more!

Join us on Wednesday, March 19th at 6:00pm for our “Home Buying, Improvement, and Insurance” Seminar, presented by the experts at First Financial and Liberty Mutual Insurance. The event will be held at our Toms River branch at 1360 Route 9 South (Corner of Routes 9 & 571), Toms River. Space is limited, so make sure you sign up today!

Register Now!
*Please note that this seminar is free of charge for First Financial members to attend. The seminar is open to non-members of the credit union to register and attend, however a $15 fee payable by check or cash will be collected at the seminar and credit union membership will be confirmed for all in attendance at the seminar. Should a non-member wish to become a First Financial member after attending the seminar, $5 will fund their membership deposit and be kept in their base savings account upon membership opening, and the other $10 will go to the First Financial Foundation for scholarships and classroom grants.

8 Outside-the-Box Ways to Find a Home

1-waiting-to-buyFinding the perfect home for your needs, wants and budget can be a challenge even when mortgage rates are low and there are plenty of properties for sale. But when fewer homes are on the market, buyers and their real estate agents must find creative ways to maneuver around the competition.

According to the National Association of Realtors, while inventory levels recently rose, the supply of non-distressed homes remains well below normal.

If low inventory makes your search a challenge, you need to be willing to think outside the box.  Here are just a few ways to do so!

#1: Set up an alert system.

“We always set up our buyers with daily automatic emails and text alerts with new listings based on their criteria from the past 24 hours,” says Russ Murray, broker/owner of Buyer’s Resource Real Estate.

“When the market is highly competitive, we’re proactively searching for new listings multiple times a day, and in the process of transitioning to a system that can give us and our clients immediate alerts when a property is listed.”

Make sure your real estate agency has a similar system in place in your area.  If not, you’ll want to specifically search for an agent who can accomplish this for you.

#2: Contact those who bought during the downturn.

Many realtors will search their database for past clients who bought when the market was down in 2008 and 2009, and will call and update them on current market conditions and ask if they’re interested in selling now that prices have increased.

#3: Target rentals.

You or your real estate agent may also contact landlords of rental properties to see if they would be interested in selling. You may never know if you don’t ask!

#4: Write a letter.

Frank Llosa, broker/owner of FranklyRealty.com, says he writes letters to homeowners in specific areas where his buyers want to live.

“About two percent of the homeowners we contact via letter – end up deciding to sell,” he says. Llosa suggests asking neighbors who are walking their dogs about potential sellers too.

“Dog walkers know everything,” he says. “They may have seen a photographer at the house or a landscaper getting a place ready to go on the market.”

#5: “Make Me Move” listings.

Buyers can search by zip code on Zillow.com for “Make Me Move” listings where homeowners who are testing the market put up an above-market price to see if buyers are interested. Llosa recommends contacting those owners to see if their price is firm or they’re willing to negotiate.

#6: Sign up on PreMLS.com.

There may be a social media group in your area for members who share information about listings before they go on the open market.  Look for these types of groups and join them, or have your agent look into a group like this as an additional option to assist you.

Llosa has seen that “some agents let buyers see a home before it goes on the Multiple Listing Service (MLS) and others tend to just alert people so they can see it on the first day.”

#7: FSBOs (For Sale By Owner).

A variety of websites including Zillow.com, ForSalebyOwner.com, iGoFSBO.com and Craigslist, allow you to search by zip code to find for-sale-by-owner homes. ForSalebyOwner.com has an app for smart phone users to search for homes in addition to their website too.

#8: Forget single-family homes.

Look into switching your selection from a single-family home to a townhouse, or look for a home that needs some work.  This may be easier to obtain, and you might even like it better in the long run!  Keep your options open.

If you have any questions about the home buying process, feel free to ask us!  We know it can be an intimidating process at times, and we’re here for you.  To apply for a 10, 15, or 30 year First Financial Mortgage – click here.* 

  • A 10 year mortgage of $100,000 at 3.617% APR* would have a monthly payment amount** of $988.39.
  • A 15 year mortgage of $100,000 at 3.903% APR* would have a monthly payment amount** of $721.04.
  • A 30 year mortgage of $100,000 at 4.667% APR* would have a monthly payment amount** of $506.69.

You might also want to subscribe to our Mortgage rate text message service, by texting “firstrate” to 69302.  When our Mortgage rates change, you’ll be the first to know***

Click here to view the article source by Michelle Lerner of FOX Business.

* A First Financial membership is required to obtain a mortgage and is open to anyone who lives, works, worships, or attends school in Monmouth or Ocean Counties.  Subject to credit approval. See Credit Union for details. 

**Payment examples do not include taxes or insurance. Financing up to 80% value of property.

***Standard text messaging and data rates may apply.

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What to Do If Your Credit Score Is Too Low For a Mortgage

first-time-home-buyer-1If you’re preparing to buy a home, you probably know that your credit score is important. Maybe you’ve already been turned down for a mortgage because of a low credit score. Or maybe you’ve recently pulled your credit report, only to realize that your credit is worse than you expected.

Don’t give up on buying a home yet! There are plenty of places to turn if your credit is too low to get a conventional mortgage. But first, you should figure out what lenders expect of your credit score, since you might be surprised to find that you may be able to buy a home with your current credit score.

What do lenders expect?

Lending requirements vary from one lender to the next, but they’ve generally become more strict since the subprime mortgage lending crisis in 2008. As a rule of thumb, though, you’ll need a FICO score of about 650 to get a conventional mortgage – and that’s on the low end.

Remember, the lower your credit score, the higher your mortgage rate is likely to be. This can have a dramatic effect on how much you pay for your home over time. So if you’re sitting on the mid-to-low end of the credit spectrum, you may want to look into some of these options, even if you qualify for a conventional mortgage.

Put More Money Down

Mortgage lenders look at a host of factors when deciding whether or not to lend you money. One of those factors is your credit score. But another factor is your down payment.

With some lenders, you may be able to offset a weak credit score with a higher down payment. With a bigger down payment, you’ll have more equity in your home, which means the lender takes less of a risk when lending to you.

If you’ve got a substantial amount of money in savings, but still have a fairly low credit score, consider applying for a mortgage with a community credit union, like First Financial. Often, these smaller entities operate under more flexible lending guidelines, so you can talk to a loan officer about your situation and maybe get a favorable result.

To speak with First Financial’s lending department, call us at 866.750.0100 option 2, and to learn more about our mortgages – click here.

Work With a Homeownership Counselor

There are some local and national nonprofits that offer homeownership counseling.

Nonprofits like these offer counseling to future homebuyers who need help raising their credit scores or navigating the homebuying process. It may take some time, but with the help of a credit and housing counselor, you can learn which steps to take to raise your credit score and apply for a home loan.

First Financial offers a free Home Buying and Mortgage seminar every year; stay tuned for the 2014 seminar calendar to mark the date! To register for our upcoming free seminars, click on the purple “Attend” icon on the bottom our website. All of our staff is here to help you, if you ever have any questions please don’t hesitate to stop into any one of our branches and see us!

Get Your Credit Score Up

You could also simply take the time to bootstrap yourself into a better credit score. Raising your score isn’t complicated, but it does take time, discipline and hard work. These steps can help get your credit score up so that you can qualify for a mortgage.

  1. Correct any errors on your report, especially late payments or collections accounts that aren’t recorded properly.
  2. Make all your payments on time. Late payments are the # 1 way to ding your credit score.
  3. Pay down revolving debt like credit cards. A high debt-to-credit ratio is another surefire way to lower your score.
  4. Wait it out. As long as you’re paying down debt and making payments on time, your credit score will eventually rise on its own.

Don’t forget to utilize all of our free online financial calculators located here and to improve your credit score, and try our low-cost, credit counseling service, First Score! For just $30 you receive a one-on-one interactive session with a First Financial expert, which simulates your credit score with various “what if” scenarios.

Once you get your credit score, First Score will tell you what you need to do to reach all of your financial goals. First Score will also tell you what actions will help you increase and decrease your credit score.

Ready to try First Score? You can email us at firstscore@firstffcu.com or call 866.750.0100, Option 2.

*Click here to view the article source by Abby Hayes of US News. 

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