First Time Homebuyer? Give Me a Break!

The Housing Assistance Tax Act, which is a section of the recently passed Housing and Economic Recovery Act, provides some incentives to put the residential housing market back on it’s feet. Are you in a position to take advantage of them?

If you are (or will be) a first time homebuyer purchasing a home between April 9, 2008 and June 30, 2009, you may be eligible to receive a tax credit. Good news, right? This tax credit is kind of like a fifteen year, zero interest loan. Not a bad deal, huh?

The tax credit you can claim is equal to the lesser of $7,500 or 10% of the price of the home. So if you buy a $65,000 home, you can claim $6500. But, if you buy a $85,000 home, you can only claim $7,500. The main catch is you have to pay the credit back to Uncle Sam over the next 15 years. However, it’s interest free. You start doing so the second tax year following your home purchase, so you have a little breather before you start. If you sell your home before you’ve settled your debt, you have to pay it back upon sale. But you won’t owe the full amount of the outstanding credit due if your gain from the sale of your house is less than what you owe.

You have to qualify for the benefit, naturally. And the amount for which you can qualify varies. You have to be a first time homebuyer, as mentioned above (and that includes your spouse if you’re both on the loan) who has had no ownership interest in a principal residence for the past three years (date of your home purchase). You see, in the mortgage world, if you haven’t had a mortgage within this time frame, the fact that you owned and sold a home five years ago doesn’t count. Mortgage Lenders and underwriters want more recent history.

The tax break will not apply to you if you obtained a THDA (Tennessee Housing Development Agency) loan because the thought process is you’re already ahead from receiving benefit of use of proceeds from a tax-exempt revenue bond. In other words, the government’s already given you a deal. No double dipping allowed. You also can’t be a non-resident alien, and you have to keep your home for at least a year to claim this particular tax benefit. So, if you’re transferred and have to sell your home in six months, you’re out of luck.

There is an income cap that must be met for qualifiers. If you’re single, the benefits available start to dwindle if you earn more than $75,000 per year, or $150,000 for joint filers. It’s unavailable completely if you earn $95,000 individually or $170,000 jointly.

So is this deal a good one for you? How could you take advantage of it? Well, again, look at it as an interest free loan. You can put some nice appliances in a kitchen, finish out a basement or do some landscaping for this type of money. So, it can work to your advantage. But make sure you qualify before attempting to take this credit. It’s not the type of thing you want to make a mistake about because filing your taxes is serious business. And if you do qualify and it makes sense for you, spend your money wisely. The ultimate goal is to get this economy moving, so if enough people can take advantage of it, it just may work. It’s worth a try, right?

Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at http://www.kristinmortgage.com/ Home Loans Plain Talk.

Testimony - My customers are extremely important to me, and I am here to prove it

“Kristin was able to provide the dedication and information that I needed to purchase my first home. Without her wealth of knowledge and experience I would have never been able to get away from the money pit that calls it self “rent!” Thanks Kristin!”

~Travis G. / University of Tennessee


“Your home is your most important investment. For many people, it’s the largest debt that you’ll ever personally incur. And, your home is where you will raise your family and create your own secure haven. These are two compelling reasons why you should take the greatest of care and consideration when choosing a mortgage specialist. I will take all the time and energy necessary to ensure you have the best options before you when making the important decisions that affect your largest and most important investment. Let my experience and years in the industry work for you. My customers are extremely important to me, and I am here to prove it.” - Kristin Abouelata Mortgage Specialist

College Graduation: Should You Go to Europe or Buy House?

You’ve graduated college and start your new job in a month. With graduation cash to burn, should you go on vacation or invest in a home?

Congratulations! You’ve done it. You’ve spent all that time at the library, sweated out those exams and are actually going to walk down the aisle in cap and gown. Not to mention, you have your real first job! You went through the recruitment center at school and someone actually hired you. What an exciting time in your life! Now, what to do with all that graduation cash you’re raking in? Should you buy a Eurail pass and plan a back pack trip to Europe? Or, better yet, should you buy a house?

Wow. Buy a house? Aren’t you too young? That sounds awfully grown up, doesn’t it? Personally, I probably would go to Europe if I were a recent graduate with a fist full of graduation dollars. I never really thought things through when I was young and adventurous. I’m paying for it now. But, if that opportunity had presented itself to me, I would like someone to have made me think twice about it. Besides, the dollar isn’t doing so well in Europe right now. It’s sound advice to which even I would have listened at young age.

Recent college graduates can qualify for a home loan, but it depends on a few things. A big hurdle is a down payment. There are 100% financing opportunities out there, but they aren’t as readily negotiated as they formerly have been. What better graduation gift to ask for than a home down payment? Also, I’d be willing to bet that Aunt Ginger may be more generous with her checkbook if she knows you’re saving to buy a house and not a keg of beer. Typically, you need to have 3% of your home purchase price saved, and can negotiate for the seller to pay some if not all of the closing costs. So, if you were buying a $100,000 home, you should have about $3,000 in your bank account. That’s a good starting point.

How’s your credit? Like most college kids, do you already have a credit card in your name? I hope you’ve been paying it on time. Good credit is a pre-requisite for any mortgage these days. You aren’t too young to establish good credit. If you have none, open a credit card, put your gas on it each month, and then pay it off each month. Before you know it, you will have established a good credit history. Most of you already have taken these steps.

Typically, a mortgage lender will approve a recent college graduate for a loan if their new income supports their debt, the aforementioned items aren’t an issue and they are on the job by the day of closing. In fact, if you have a contract for employment, you may even be able to close on a home loan prior to starting your new job, but you better have a solid contract and plans to start very soon (providing your first pay stub after closing is common)! In addition, you will also have show evidence to your lender that you’ve been in school for the past few years. Typically a copy of your diploma will suffice. If you don’t have one of those nifty wallet sized copies, you can bring your actual diploma to your lender and have it photocopied. (I’ve had to unroll them from their packaging tube and gingerly lay them out on the copy glass, careful not to mar them).

There are many arguments to why buying a home is smarting then renting. You aren’t “throwing away” money in rent, you’re investing for your future, and if your loan program is one that lets you rent out a bedroom to a buddy, you can actually put a little cash back into your pocket. And if you are able to put a little moola aside quickly, maybe deferring that European trip isn’t such a bad idea after all!
Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at http://www.kristinmortgage.com/ Home Loans Plain Talk.

What are all these fees and why is a mortgage so expensive?

Not only are the expenses associated with a mortgage hard to understand, people often wonder why a loan costs so much. Here's a little background info to explain why home financing isn’t cheap…

Did you ever wonder what a great credit score really gets you in the mortgage market? Many people think it means they get better pricing. Unfortunately, that’s not really the case. It mostly just means your lender won’t have to hassle you for as much documentation to do your loan. In fact, no documentation may be required from you at all if it’s a purchase and you put enough money down. I’ve heard many clients say, “I’ve got great credit, so quote me your best rate.” Good credit can’t directly influence the rate. But it can influence your mortgage loan officer to give you better pricing. If your lender can be assured your loan process is streamlined and smooth, and that they won’t have excessive hours to devote to the process, they may be able to quote you a more competitive rate. Much about a quoted rate depends upon the man hours it will take to make your loan, the loan amount itself and how quickly you can close.

Lenders usually have a minimum percentage of income they are supposed to make on a loan. That percentage is flexible, but only to a certain extent. For instance, the loan amount size is a huge contributing factor. If you’ve got a really large loan amount, your lender doesn’t need to have a feeding frenzy on your loan. The percentages lower because the payback is higher.

However, if you’ve got a really, difficult loan and a modest loan amount, you can expect higher rates or discount points. Or fees. Some lenders may raise your fees to make you think you’re NOT paying as much. But you are. You have to in order for the lender to cover the cost of doing business.

Here’s the secret. Closing a loan is actually a very involved process. Lenders can’t do the loans for free or break even profit because it’s a business and their in it for profit. Plus, there are many people involved in the loan process that you aren’t even aware exist. Processors, closers, post closers, insurers… a staff of thousands! Ok, so maybe not thousands, but your file is probably touched by 5+ different divisions (at minimum) within a mortgage company. Since it is a business, the lenders must make enough money on the loan to cover their costs and actually make money, too. The lender also pays outside parties for services too, like the appraisal, flood cert and automated underwriting system. Paying your originator is just the beginning of the mouths (and families) being fed by your business. It ain’t cheap to close and sell a mortgage.

When you examine all the fees and charges on a good faith estimate, your lender should be able to tell you exactly where that money is going and how it is to be spent. Your lender should have no qualms in telling you what costs are associated with your loan, or which funds cover third party expenses that your lender incurs by doing your loan. And some of that money will be profit. Much of it may be. But remember, you’re not just paying the salary of only one person. However, you shouldn’t pay too much for your loan. After all, the lender will make additional profit on the loan when it is sold on the secondary market.

A good lender will validate any fees and charges for you and should make you feel ok with the fees. If they don’t seem reasonable or fair, always ask questions. If you don’t like the answer, say so. And if you still don’t like the answer, than look for a new lender. Buying a home is such an important purchase and you should feel good about it.

Let my experience work for you! Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist, at question@kristinmortgage.com or call (865) 567-0113. Kristin will try to answer all questions on her website Home Loans Plain Talk.

Kristin Abouelata
Mortgage Specialist
Let my experience work for you!
Knoxville, TN 37919
Phone: 865-567-0113
http://www.kristinmortgage.com/

Buying Your First Home, It’s Easier Than You Think! – Now what? Part III

For a first time homebuyer, once you’ve found a house and been pre-qualified for a home, the steps to closing can be somewhat confusing. It’s actually a simple process that when understood, actually makes sense.

You have found the perfect house. You can’t believe that you are actually buying it! You thought buying a house was only for old people with kids, you know, like in their thirties or something. Now what happens?

You’ve should already have been pre-qualified for a home loan by a mortgage specialist. In fact, that lender gave you a letter, saying as much, and you gave it to the seller, giving them peace of mind that your offer is real and you can back it up. Your credit has probably already been pulled and you’ve been given a copy of it. Your realtor will provide the fully executed sales contract to your lender. Upon receipt of this contract, your lender will update and get you all your documents and disclosures to sign, within three days of receipt of your contract. If your credit has already been pulled and you’ve seen these documents, expect a NEW set since you finally have a property in mind. And trust me, this is only the beginning of the deluge of documents you will see, sign and sign again.

Your lender will now go back to your loan and put in all the particulars of this property - such as taxes, homeowner’s association fees - and reflect any earnest money you may have put down with the contract. At this point, with a property determined, you can explore locking in an interest rate or reserving funds if the loan is through a particular housing agency. Your lender will also want to collect and update documentation that proves all you have related about yourself. I call it “eye balling” the documents. Assessments will be made if there is further documentation required to substantiate your loan application.

When all contract contingencies are removed, the lender will order the appraisal for your property. The lender chooses the appraiser and the type of appraisal necessary to ensure the value of the property. After all, it’s the lender’s money on the line, and in case you don’t repay your loan, the value of the loan may have to recouped in a foreclosure sale of the property. Not likely to happen, but the lender will make sure they are protected by the appraisal. The appraiser will notify all parties involved that there may be repairs required before the value can be found or the property will adhere to a certain standard required by the lender. The lender will communicate this information to your realtor to negotiate the repairs with the seller.

The lender prices, processes and assembles your loan for underwriting. They order title work from your chosen title company and coordinate all the pieces of the puzzle for the closing. They collect your homeowner’s insurance and share this information with the title company. The title company searches the title and rectifies any outstanding liens for closing. Sometimes, the title company finds old tax liens or worker’s liens (known as materialmen’s liens). They make sure that these liens will be satisfied prior to you taking ownership to the property. They also make sure that everything historically has been recorded and released properly.

Once the appraisal is received and the documents are submitted to underwriting for final approval, the lender receives an underwriting decision. Sometimes, there may be something in your file that will cause an underwriter to ask for more documentation. Sometimes, an underwriter will ask for additional comparable sales of homes in the area for the appraisal. Many times, a customer never knows that these conditions arise because their lender anticipates or addresses them for them. Sometimes a customer may be contacted for information. But, your mortgage specialist should have a good assessment of the situation and be able to validate and explain anything they ask of you.

Two days before closing, you will receive a HUD-1 Settlement Statement from your lender and/or title company. This document is summation of all the charges and fees in connection with your loan. You will be asked to review this document to ensure that it is correct. It will also reflect how much cash you will need to bring to closing.

At the closing, all parties involved usually show up at the same time to sign documents. Sometimes, the seller and the buyer sign separately due to scheduling conflicts. Your realtor and your lender should be expected to attend your closing. You will sign a stack of huge documents, but when all is said and done, you will handed the keys to your new home!

Your lender, realtor and title company should all work to make this process as seamless for you as possible. Their job is to make this experience an informed, easy and worry free process. You will have to make certain decisions, but you should be informed so that they do not overwhelm you. It’s easy to forget how mind boggling all the documentation can be in the home loan process when are exposed to it every day as part of your job. Your lender should be patient and explain things simply -no smoke and mirrors. Buying a home doesn’t need to be difficult or stressful. A good lender will make it exciting and educational!

Because you can, visit: Home loan Knoxville TN

So, you found an article taped to your iPOD, “Psst…Tell Your Kids that Buying a Home Is Easier than They Think!” Part II

Just out of school and considering buying your first home? You’ll be surprised how easy it can be to qualify for a loan. Too often, the newly minted workforce doesn’t realize the confidence lenders have in their ability to be responsible homeowners.

Ok, so Mom and Dad told you that you need to buy a house. You've graduated from college and you're earning a decent income. Even though you don't feel like it most of the time, you are officially all grown up. But you ask yourself, "I'm only twenty-four years old, who would possibly loan me money to buy a house?"

First time homebuyer programs are established with flexible guidelines to attract – you guessed it –first time homebuyers! You are in a great position to buy a home provided you have established some history of decent credit. Even if you don't have traditional lines of credit to show for yourself, you may have established non-traditional credit and not even realized it. Do you have utilities, a cell phone and cable bill in your name? Have you paid them on time for 12 months? Then you have established non-traditional credit. Granted, many of you already have a credit card or gas card in your name. That's why Dad wanted your name on it, too. Good thinking on his part. At the time, you were just excited to get the credit card "for emergencies." It didn't even occur to you that you were establishing a good credit history.

Most lenders want to see at least a year under your belt earning income. The majority of new job workers are making at or under the median income limit for their area. There are those that beat the curve, but then, if you're making that much money on your first job, you don't need a first time homebuyer program. You can probably take another route to your first home. Also, recent graduates can get credit for having a diploma. If you have a diploma and an employer who is willing to verify that you earn what you say and are likely to continue on with them, then you're good to go -even without a year's employment history to show for yourself.

Some lending programs ask that a borrower have maintained an excellent rental history, preferably a two year history. But, you don't get penalized if you have been living at home. Especially, if home is in the same city that your school is located. You are simply asked to provide explanation as to how you managed to live rent free. Sometimes, Mom and Dad have to provide a written statement. They're probably willing to do that to get you out of the house and off the payroll.

What about a down payment and closing costs? Most programs will allow a seller to chip in 3% of the sales price toward your closing costs. This allowance can cover most if not all of your closing costs. Your realtor simply needs to be aware that you need this concession so she/he can negotiate it with your purchase contract. And how much do you have to come up with for a down payment? How about $0? Nearly all first time homebuyer programs are designed for empty pocket consumers with potential to earn more and maintain good credit. Some programs don't require you to have any reserves in the bank. Since so many first time homebuyers live on a budget, these programs allow for the reality of life. And you can be rewarded for being a conscientious consumer with lower than average interest rates being available to you.

You may be ready to buy your first home and not even know it. A good mortgage specialist will pre-qualify you, find out what you can afford or what your comfortable paying. Then, you just have to find the right home. It's easier than you think!

Because you can, visit: Home loan Knoxville TN

Series Part I Psst…Tell Your Kids that Buying a Home Is Easier than They Think!

We encourage our kids to plan for their future, but we seldom include buying a first home sooner than average as a path to building that future. Let them know buying a home is easier than they think.

Most of the people who read this column are not first time homebuyers. The fact of the matter is many of you that are first time homebuyers and reading this article are relatively mature individuals who are fighting off your commitment fears of being tied to a mortgage. But there is a huge segment of the population that could buy their first home, yet it doesn’t occur to them to do so. Who are these people? Well, it’s your 24 year old son or daughter, new to the work force, and is throwing away money on rent somewhere. Encouraging your children to buy a home when they are young is some of the soundest financial advice you can give them. Equity in a home is an easy way to grow one’s portfolio with very little investment. But the fact of the matter is it doesn’t occur to most of us to encourage the younger generation to buy early in their lives. And trust me, it rarely occurs to our kids themselves to consider buying a home in the early twenties. They are more concerned with buying a new Halo 3 for their Xbox.

Why do so many people miss the boat on this opportunity? It could be they plan to be in the area for only a short time because they will job hop to advance their career, thus viewing a mortgage as “too permanent.” I counter to simply sell the house when you move. Or maybe they expect their income to double or triple over the next three years. I say buy a home now, then upgrade to a new home; sell or rent the old house. Investing in real estate is a proven, safe and solid return on investment. And with the right combination of credit history (or a history of paying utilities, cable and your cell phone on time) and no money down, you or someone you care about can start investing in the future.

When Junior starts his new job at the company and 401(K) is available, he’s been informed by his folks, boss or peers to enroll and contribute at least a little something to it with every paycheck. Yet, he is rarely counseled quit renting that apartment for $750 a month and buy a $75,000 house. Where will he come up with the money to do it? There are multiple options for first time buyers that allow for 100% financing. Get the seller to kick in closing costs (up to 6% of sales price with some products), and one can close on a loan and bring no funds to the table. If your home value appreciates 4% in the next year, that’s a nice return on a no cash investment.

For some time, I’ve considered writing this series for first time buyers to let them know buying a home is easier than they think. But, the more I thought about it, the more I realized the advice I would offer would most likely not reach my target audience. So parents, it is up to you to supply your kids with this last little bit of advice and help to set them free to further establish their independence in this world. Clip this article out and tape it to their iPOD or the steering wheel of their car – someplace it will get noticed.

I think for most of us who have been through the experience, our first home buy was a very daunting experience. There are so many choices and unknowns - it can be overwhelming. In this series, I will try to break it down the process into small logical steps and make it easier understand the steps involved in financing your first home. Where do you start? That is perhaps the easiest part. Our newly established worker should first make a list of all his or her debt obligations such as student loans (unless deferred), car payments, credit card debt, etc. Hopefully at this age, this will be a small list. Then add what you think amount you could afford for a mortgage. Take that amount and divide it by your gross monthly income. If you come in at 43% or less, you’re in business. If you have something in your savings or checking - great. If not, don’t let it deter you. You have options.

Contact a mortgage specialist to drill out the details and find a good realtor who knows your market for housing you can afford. What next? Get ready to tell your landlord “Adios!.”

Because you can, visit: Home loan Knoxville TN