REO Single Family Residences

For those of you first-time home buyers still on the fence about buying a house, you might want to look at the foreclosures here in Sacramento. Either do the search yourself or follow this link to the foreclosure listings page. I've been showing a lot of these bank-owned properties to prospective investors and - mark my words - these are going to become future rentals.

A recent poll in the Sacramento Bee said that about 50% (or more - I don't have to exact numbers) of potential home buyers are staying away from buying right now, because they are afraid of falling home prices over the next two years. If you're only going to live in the house for two years, I can see being a little concerned. But if this is a house you intend living in for anything more than seven years, I think that thought is foolish, baseless fear. Do the math and see for yourself - also consider that Sacramento area real estate appreciates at about 6% per year on an average, in spite of the dips.

First-time Home Buyer Mistakes: the Deadly Three

First time home buyers, as hard as it may be, try and stay away from these three cardinal mistakes I see repeated over and over again. These three mistakes are deadly to your home shopping and home buying experience partly because they can make you want to run to the comfort of your (rented) apartment, even if you have fully decided to buy a home this year.

Mistake #1: Looking for the Perfect Home
There is no such thing as the perfect home. Yes, you may quote me on that. In the years of homeownership myself and selling houses to others I have reached this one conclusion that there is no such thing as perfect. When you are searching for houses all you will get is good enough. It is what you make of it that makes it perfect.

Now I know there are some people that will walk into a home and know that it is absolutely the one they want. "It's perfect!" they might even say. But I contend that what these clients see is the home as it will become when they have moved in and had their way with it. No pun intended.

Mistake #2: Having too Wide a Scope
My first client to whom I showed a lot of homes, but didn't sell one because they got frustrated, looked all over Sacramento for houses. They went from Elk Grove to Folsom to midtown Sacramento and liked all the homes equally. Unfortunately, this was also at the time when houses were being snapped up in a day and they didn't get any of them. The problem was they liked all the homes equally - not doing enough research into the neighborhoods involved creates such a situation.

Unfortunately in today's market this problem is magnified. With all this choice and a great many homes to look at, home buyers just seem befuddled. They would like to live in a certain neighborhood they've been watching for a while but what if there's a better one out there? So they search and search and the home search itself becomes the end of their journey. Yes, there really is such a thing as too much choice.

Mistake #3: An offer that is way too low
Say you've skipped over the first two (lucky you!) and found the home you're looking for. Now comes the decision - what do we offer? Beware of mistake #3 - making an offer which will immediately get rejected as frivolous.

This is also a symptom of today's market. With prices falling / having fallen in many areas, the focus seems to be on how big of a discount on the asking price one can get. The focus should be on how much value you are receiving from the purchase. But getting sidetracked has cost many a good home. Once you have offered a low price, you are more likely to justify your offer and less likely to see the house objectively.

So happy hunting! And steer clear of these Deadly Three. If you do, you'll have done the almost impossible: bought a very inexpensive house in a buyer's market.

Home Buyers: 100% Financing Getting Harder

I had mentioned in early December that first time home buyers would have a harder time getting qualified for a loan and that there was still time to buy real estate with zero down before February. My clients at the time had excellent credit scores, great incomes and were buying a house so far below market that even when the lender asked for more comps, we were able to provide them.

That excellent purchase went through just fine, but today the Sacramento Bee reports that mortgage insurers may begin to stop issuing PMI for 0 down financing.

Unfortunately, thanks to the empty-headed bubbleheads out there, such warnings when issued by Realtors are ignored as "just a sales pitch" with the obvious remark, "Of course you're going to say that - you sell real estate!" That's like saying, borrowing a comment from John Lockwood, to a doctor, "Of course you're going to say it's a good time to get sick - you're a doctor!"

First-time Homebuyers Might Have a Harder Time Now...

Traditionally, first-time homebuyers have bought homes with little or no money down. A recent email I received from Huck Ferrill, the mortgage expert of this blog, seems to suggest that these loans might be drying up for these first-timers as of the middle of next month.

100% loans on houses are backed by mortgage insurance, which insure the lender in case the borrower defaults on the mortgage. But now, at least two mortgage insurance companies have decided not to insure 100% loans on houses in California to limit their exposure.

This can have a major impact on those buyers who have less than 5% down on a home. With lending changing everyday, especially in this market, it is important to get pre-approved (not just pre-qualified) with a mortgage broker before going shopping for a home. It is also a good idea to make sure that the pre-approval is still valid when you do find the home you've been looking for.

I'm a First Time Homebuyer. What Loans are Available to Me?

The obvious answer is any loan that's available to any buyer, but since the most frequent challenge that we see with first time homebuyers, is that they have little or no money for a down payment. So for purposes of this article we're going to focus on programs that allow for 100% financing of the purchase price.

CONVENTIONAL PROGRAMS

In general, these programs are limited to properties selling for $417,000 or less, and there are are number of them with names like "My Community, Flex 100, Home Possible" or any number of proprietary names that various lenders might attach to them. All of them will finance 100% of the home's purchase price with a single loan, and all have very similar requirements-a minimum FICO score of 620, ability to document one's employment and income history for at least two years, minimum (sometimes no) reserve requirements, etc. They also will allow the home to be purchased "as is" in most cases, as long as the home is in reasonably good condition as determined by the appraisal. This is extremely beneficial if one is trying to buy one of the plethora of bank owned properties currently on the market. By the way, there are some real bargains out there now-the last six first time homebuyer transactions I've worked on, appraised for 5-7% MORE than they are being purchased for! Also, in most cases, the seller is allowed (and usually is willing) to pay up to 3% in buyer's closing costs.
An example of a typical payment for a $200,000 home looks like this:

$200,000 loan @ 6.5%, 30 year fixed $1264.14 principal and interest monthly
mortgage insurance @.59% 98.33
property taxes 208.33
homeowners insurance 58.33
TOTAL $1629.13

FHA LOANS

The typical FHA loan requires a 3% down payment and the maximum loan is about $264,000 in the Sacramento area, but the down payment can be a gift from a relative or, more importantly, can come from an additional ACCESS loan for 7% of the purchase price. That's enough to pay the required FHA down payment and all buyer's closing costs! Another advantage to FHA is that they have no minimum FICO score requirement. In fact, it's possible to obtain a loan even if there are NO accounts on the buyer's credit report. In those cases we will obtain rent ratings, ratings for utility or telephone accounts, car insurance payments or anything else the buyer has been paying regular monthly payments on. We've even used memberships in gyms for ratings!
Here's how an FHA ACCESS payment would look on the same $200,000 first time home:

$203,000 loan @ 6.5% 30 year fixed $1246.53
FHA mortgae insurance @ .5% 80.96
property taxes 208.33
homeowners insurance 61.61
$14,000 ACCESS loan @8.5% 20 year fixed 121.50
TOTAL $1718.93

That's a little higher payment than the conventional one above, primarily because the down payment and closing costs have been financed in this example. Great loan for those with FICO scores less than 620 however!

VA LOANS

Originally developed for veterans returning from WWII, this program administered by the U. S. Department of Veterans Affairs, is THE program for the qualified military veteran or in some cases, the widow of a military veteran! It provides a federal guarantee for a loan to finance 100% of the purchase price of a home up to about a $260,000 maximum and is generally available to active or discharged veterans with more than six months active service. If discharged the discharge can be any discharge that is "other than dishonorable." The benefit runs for the life of the veteran and can be reused multiple times over a lifetime. It has put literally millions of first time homebuyers into their first home! One of the other beauties of this program is that while it has a "VA Funding Fee" built into the loan, it requires NO mortgage insurance.
So check out the VA payment on our $200,000 home:

$204,300 loan @ 6.5% 30 year fixed $1291.32
property taxes 208.33
homeowners insurance 59.59
TOTAL $1559.24

I'll bet it would cost about that much to rent some of the $200,000 homes I've seen lately and one would have to put up first, last and security deposit, etc. Better to get the seller to pay closing costs, not have to go in with any money, and own the home!

There are other ways to finance all of a home purchase, CalHFA, CalVet, CalPERS, etc. all with their benefits and drawbacks, but the three above are the basics. Better for the reader's eyes (and my typing fingers) if we end here for the moment....

First-time Homebuyers a Real Joy!

I've always said I absolutely love working with first-time homebuyers. Of course, it becomes even more fun when the homebuyers are excited, have timed the market just right and are your friends!

Yesterday, we opened escrow on a fantastic property my clients and friends found in the Foothill Farms area. It is a 3 bedroom 2 bath house and had an asking price of $199,000. The home sold last year for $330,000 and then was foreclosed. As an REO, it is one of the best deals around. My fingers are crossed - I imagine all our fingers are crossed!

First-Time Homebuyers Pics are here!

I promised this pictures a while ago and they're finally ready to be shown - my delay, not theirs! Take a look at this fabulous transformation my clients Jake and Zoila Couture have done with the bathroom of a home they bought last year in Sacramento's Curtis Park.















I have been inside the home and it looks wonderful. Jake & Zoila are a rare blend of character and commitment and I'm sure investing in real estate will help them achieve their financial goals.

Consider this a taste of future advertising in case they decide to sell the home sometime in the next few years. I've been promised more pictures, so stay tuned.

Finally - some sane voices enter the discussion!

Yes, the news keeps churning the same stories out again and again. Sales are down. Prices are down.

If you're a buyer on the fence, you should consider reading Terri Cullen's article in the Wall Street Journal labeled Home Buyers on the Fence.

If the headlines are scaring you back into bed, you should read this excellent article by John Lockwood on the recent Sacramento Bee foreclosure numbers.

Before and After Pics from First-time Buyers Coming!

I received a very pleasant email the other day from my clients of last year. I represented Jacob & Zoila in the purchase of a home in October of 2006 close to Curtis Park and I remember the entire transaction as specially relaxed and easy.

Of course, that always happens when you look back on something through the eyes of nostalgia. They had the usual fears of first-timers but were (I thought) marvelously aware of their goals and what they wanted out of a home.

And got it.

They bought a fixer with a Cal HFA loan (not FHA) which was 100% financed with a silent second (state funded for first-time buyers.) Recently I heard that they have made a huge amount of repairs to the house and I will be getting "before and during" pictures, not "before and after." The pictures will be here soon.

It is my belief however that they will be laughing all the way to the bank when this market turns. And I will be the first to congratulate them. I'm so proud of clients that know what they want and go for it even in the face of fear.

Yes, buying a first home can be scary. Buying ANY home is scary. But if you have done your research and know you are buying it cheap enough, you will reap the rewards.

No matter what the bubble-heads say.

First Time Home Buyers Activity Picks up in Sacramento!

This is a post by my guest mortgage professional, Huck Ferrill. He promises to write more and I will be introducing other professionals I work with on a continuous basis as well, so bookmark this site and check back often!

Meanwhile, here's what Huck had to say:

First time buyers are coming out of the woodwork in the last couple weeks. I did about 8 pre-qualifications last week and $700,000 (2) worth of live purchase applications yesterday alone. Most of them said that prices were low enough that it was time to try to buy something. One of yesterday's buyers is involved in multiple offers on a North Highlands house. That's been how recoveries have started in the past. Good sign.

Those of you waiting for good news on the real estate front, hope this helps!

Short Sale Approved for First-Time Buyers!

I've been working with a really great couple recently on the purchase of their first home and am really excited to announce that the home they liked has been approved for a short sale. We've all (the lender, the buyers, me and the seller's agent) been waiting with bated breath for about a month now. No, I'm not kidding. The date on the contract says July 11th.

I met this couple while showing my listing on 7710 25th Avenue - which is still in the approval process for a short sale - and liked them instantly. For first-time buyers, they already know a lot about investing for the future, have experience maintaining property and are not afraid of the work owning a rental property involves. With the purchase of this home, which will be their primary, they will also be jumping into managing a rental for their relatives.

I see a bright future for them if they stick with it. And something tells me they will.

Where should I Look to Buy a Sacramento Home?

Good question.

First of all, I think first time homebuyers need to consider where they want to live. Is there a particular neighborhood that interests them? Do they have friends or family living in a certain area that they'd like to move closer to or (God forbid) away from? (Well, maybe just a pleasant drive away - like 30 minutes) The area you want to live in should take the most amount of your research.

Then, start browsing homes online for that area. You can go to www.sacramento-home.com for the most up to date search and also sign up for email alerts on new listings.

No, no call to the Realtors just yet. Do some math first. Look at your monthly budget and decide how much you can afford to pay in monthly payments toward your house. Once you are already in love with a house, it's difficult to get clarity, so do this step before you actually start shopping.

Once you have your total number in your head, then compare to see if the homes in your preferred neighborhood match the number in your head. This is when you call a Realtor. You might tell her "the magic number" and your preferred neighborhood and if the two don't match find a place a little farther away from your ideal place.

In other words, now you're seriously looking for a place. Oh, don't forget to get preapproved for a loan.

There you go, you've passed the first hurdle! Now for the fun part of finding a home!