Kris Barnett of Prudential Connecticut Realty

FIRST TIME HOME BUYERS

Topics on this page:

Tips for First-Time Home Buyers
Can You Afford That House?
Why Now Is a Great Time to Buy
Why You Need a Home Inspection
What to Look for in a Home Inspection
Helpful Links for First-Time Home Buyers

Tips for First-Time Homebuyers

Educate yourself and understand the home buying process. There are many facets and intricaties to the home buying process, so although you may gain a basic knowledge, you will still have questions. Don't hesitate to let your real estate professional know you are new to the process. Make sure you chooses a sales professional woh is willing to spend time with you to walk you through everything. He or she will expect you to have questions at each step from house hunting, to making an offer, to the closing. Remember, this is one of the largest financial transactions of your life, so you want to have a clear understanding of the entire transaction, and you want to feel comfortable with your agent.

Don't buy on impulse. Don't feel pressured into making an offer. Buyers, especially first-timers, may be impressed wit the first two or three homes they view. Look at a good selection. List the positives and negatives about each home you see. Narrow the prospects to three or four and then return for a closer look. When yo decide to make an offer on a property, work with your real estate aget to get all of your questions answered before making the offer. But don't wait too long. The longer you wait, the greater the chance other prospective buyers may place offers, or express interest, making it harder for you to negotiate a good deal.

Don't look outside your price range. Before beginning your home search, I stronly recommedn getting pre-qualified to get an idea how much you will be able to borrow. Use this information as a starting point in determining your price range. Then take into consideration other factors taht will affect your monthly budget once you are a homeowner, such as property taxes, homeowners insurance, utlities, private mortgage insurance (PMI) and maintenance.

Plan ahead. Think about personal changes you are planning in the next five to seven years. For instance, if you are planning to start a family, will the home you are considering be large enough in the near future? If this will be starter home or if you think you'll be relocating in a few years, you'll probably want to pay closer attention to appreciation and resale values. If a double income is necessary to qualify for financing and to make your payments, do your plans forsee an income sufficient to continue making payments?

Focus on the location. Don't just focus on the house. Examine the community and neighborhood. Does is suit your lifestyle? Is the area safe, well-maintained, close to work, stores and school? Find out about zoning and what new construction is planned on vacant land in the immeditate area. Also consider the property marketability when it's time to sell. Is the house a popular style for the area? Many times unique home styles for particular areas are difficult to sell.

Remember, knowledge is key. No question is a silly one. As your real estate agent I will become an invaluable asset throughout the home buying process. Making smart, well-informed home buying decisions will make the process less scary and your first home purchase a rewarding experience.

Can You Afford That House?
9 Things to Consider When Making this Determination

1. Determine a house range you can afford According to the Federal Housing Administration (FHA), depending on the consumer's current debt ratio, most people can typically afford to pay 31 percent of their gross monthly income for mortgage payments. For example, if you earn $50,000 annually, then your monthly income is about $4,167. Thirty-one percent of that is $1,292. There are several online tools to calculate a monthly mortgage you can afford using factors such as your current monthly expenses, down payment and the interest rate. You should also work with a lender to get pre-qualified for a loan BEFORE you start looking-this will give you a true gauge as to how much money you realistically may be able to borrow, and give you a good idea what your monthly payments will be for homes in specific price ranges.

However, although the above is the first step to take in determining your price range, it should not be the only consideration. The following are other things you need to consider:

2. Determine how large a down-payment you can afford. Remember to leave yourself some padding when deciding how much cash to put down on your house. Here are some of the additional expenses you will have to pay out-of-pocket prior to, and at closing:

Appraisal Fee You often have to pay this fee out of pocket as part of the loan process. Depending on your location, the fee can run anywhere from $200 to $1000.
Professional Home Inspection Costs range from $300 to $800 for typical homes, but they can go higher depending on the age and the type of structure. More specific inspections, such as those for structural engineering, mold and termites, septic and well if applicable are additional.
Extra Closing Costs Although the good faith estimate from your lender should be reasonably accurate, you won't know the actual amount you have to bring to closing until a day or two beforehand. Don't play it too close. You don't want to hold up closing because you're $100 short.

3. Utilities The most obvious of additional housing expenses are utilities--gas, electricity, oil, and water. But don't forget about telephone, trash collection, and cable or satellite bills. Septic services as well as sewer costs should also be considered.

4. Taxes As a property owner, you are responsible for property taxes. The rate will vary from town to town. To get a general idea on how much the tax bill will be for a property, ask the seller for a copy of the previous year's tax assessment. Your real estate professional can get you all the information you need regarding the taxes on any property you are interested in. In Simsbury, for instance, the tax rate is 29.6 percent. That means for a home with a market value of $200,000 ( the tax assessment of the property), yearly taxes would run $ 5920.00

5. Association Dues Another cost you may incur is homeowner association (HOA) dues. Most condominiums and some residential developments/subdivisions/neighborhoods/PUDs have HOA's, which are legal entities, created to maintain common areas and enforce deed restrictions. As a property owner, you are required to pay the established monthly or annual homeowner association dues. Be sure you factor this cost into your budget.

6. Maintenance You also need to consider the upkeep of your home. You should budget for seasonal maintenance such as lawn care, pest inspections, snow removal, carpet cleaning, etc. as well as unexpected repairs. The amount you budget will depend on the age of the home, as older homes tend to require more repairs such as installing a new roof, replacing older appliances and mechanicals.

7. Insurance Depending on the type of coverage and your area, the costs for homeowners insurance each year can be anywhere from a few hundred dollars to thousands of dollars. And, if you live in an area that has high risks for flooding, earthquakes, hurricanes, etc., you may need supplemental insurance.

8. Remodeling/Upgrades Unless the home you purchase is picture perfect, you'll more than likely be adding your personal touch. Therefore, you need to add to your housing budget the costs for remodeling and upgrades. According to "Remodeling Magazine's 2007 Cost vs. Value Report, the national average for a midrange minor kitchen remodel is $21,185; a bathroom remodel averages $15,789. Prices for 2008 are just about the same according to local contractors. Even minor cosmetic fix-ups such as light fixtures, window treatments, carpeting and decorative cabinet knobs can begin to add up.

9. Moving expenses Professional movers, moving van rental fees, boxes.

By foreseeing and allowing for all the costs associated with homeownership, you can go into your home search with a reasonable price range that will allow you to stay within your budget. Don't allow poor planning and emotions to turn your home purchase into a burden, after all--a home is more than just a smart, sound investment--it's a place for you and your family to ENJOY.

Why Now Is a Great Time to Buy

The 4 factors that make this the perfect storm for Buyers

1. Mortgage interest rates remain at historically low levels Mortgage interest rates are still less than 6% for the typical, 30 year fixed-rate mortgage. Don't believe everything you hear in the media these days concerning the mortgage industry and a shortage of loan money--there is currently an abundance of conventional financing available for qualified homebuyers.

2. Higher than average inventory = better selection and lower prices With a higher than average number of homes on the market, and fewer buyers, not only do you have a great selection to choose from, but your negotiation leverage is enhanced. The "fair market value" is currently being established by buyers, not sellers. In addition to offering lower, discounted prices on their homes, many sellers are also offering seller concessions such as buy-downs, seller financing, rent-with-option, builder upgrades, Hubbard Clauses, credit towards closing costs, credit at closing for upgrades, Home Warranty programs, etc.

3. Tax credit for first time home buyers An $8,000 tax credit (or 10% of Value tax credit - whichever is lower) for first-time home buyers only is now available as part of the new Stimulus Bill that was just passed on 2/16/09. This tax credit is available until 12/1/09, and requires NO REPAYMENT!! It applies to owner occupied/principal residence only. There are income limits to qualify of $75,000 for individuals, and $150,000 for couples. Speak to our Connecticut Home Mortgage Certified Mortgage Planner for more details and to see if you qualify.

4. While all real estate markets have ups and downs, it is still one of the best means to build wealth On average, the value of a home almost doubles every 10 years. The average homeowner today has 36 times the wealth of the average renter. When you own your own home you are essentially paying yourself- when you pay your mortgage, you are building equity. Homeowners also benefit from real estate related tax write-offs such as mortgage interest. And, residential real estate's long-term financial performance has certainly out-performed Wall Street!

Interest rates at record lows, motivated sellers, discounted homes, great selection, available credit, government incentives-- WHAT ARE YOU WAITING FOR? Don't look back at this rare opportunity and say WE SHOULD HAVE!

Why You Need a Home Inspection

Purchasing a home is one of the biggest investments you will ever make. A Home Inspection will make you aware of its condition and alert you to any problems or areas of concern prior to the actual purchase. Some of the benefits of a Home Inspection are:

Home Inspection by Buyers

1. The Inspection will give you knowledge about your purchase - you will know exactly what you're buying. The Inspection will reveal many things about the house that are not apparent when you're walking through initially.

2. The Inspection will give you confidence and peace of mind. It will determine whether or not you're making a sound buying decision. You will have information that will enable you to re-negotiate with the seller on any major expenses you were not aware of when making your offer.

3. The Inspection will prepare you for any necessary repairs, replacements, or maintenance, and limit the number of problems you may discover after you move in.

4. The Inspection will educate you about your new home, and provide you with invaluable details about the condition of the property, as well as how the house operates, where important mechanicals/valves/switches are located and how they operate, etc.

Home Inspection by Sellers

1. If you choose to have your home inspected before putting it on the market, you will anticipate any problems the buyer's Home Inspector will reveal. If you do not want to do a full Home Inspection, you should probably hire experts to inspect the major items that can cause the most concern to buyers such as: furnace, air conditioning, roof and plumbing systems.

2. By doing your own inspections, and fixing any problems, you will avoid the buyer getting a negative inspection report that gives them the opportunity to request significant price reductions, or gives them a reason to get out of the deal completely.

Home Inspection of New Construction

1. For newly constructed homes, have your home inspected before the drywall is installed. This is called a "preclosure inspection". This inspection will give you a better chance to identify and correct any potential problems at a time when they are easier and more economical to fix.

How to Find a Good Home Inspector

1. Make sure your home inspector is a member of a professional home inspection organization. Companies that are affiliated with professional organizations are professional and are serious about what they do, and who works for them. They make sure their representatives are knowledgeable about new developments in their field, and offer continuing educational/licensing opportunities. Two very well-known trade associations are: American Society of Home Inspectors (ASHI) and National Association of Home Inspectors (NAHI). These associations can help you find members in your area.

2. If your inspector is not a member of the above organizations, make sure he or she has extensive experience. The best home inspectors have been in the business for many years and have inspected hundreds and even thousands of homes. Make sure your inspector has gone through extensive training. In many states inspectors can simply call themselves home inspectors without any training or licensing.

3. Make sure your inspector carries Professional Liability Insurance (Errors and Omissions Insurance). If you ever need to collect on a legal judgment, an inspector without insurance may not be able to pay your claim.

What to Look for in a Home Inspection

Your home inspector will be checking and analyzing many things about the home, both inside and out. Most Home Inspections are extremely detailed and will provide you with a written record of what was inspected and what condition your home was in at the time of the inspection. Walk through the home with your inspector and ask any questions you may have. Pay particular attention to the condition and recommendations of your inspector regarding the following vital components:

1. Foundation Your inspector will be looking for cracks in the foundation. If there are cracks or irregularities, you may need a further inspection to check the integrity of the construction. Not all cracks are problematic, but a structural expert can determine how serious foundation cracks are. Follow your inspector's recommendations.

2. Roof The most important thing to determine when checking the roof, is determining whether it is leaking. If the roof is not leaking, the inspector will attempt to determine if the roof has any flaws that could cause leaks in the future. The inspector will also be able to estimate approximately how old the roof is, and how much life the roof has left, although there is no scientific way to determine this exactly.

3. Drainage In order to prevent flooding into the home, the home should be properly situated on the property. The land should slope away from the home and at least 6-8 inches of the foundation should be visible. Also, all gutters and drainage spouts should be angled away from the house.

4. Windows and Doors All windows should open freely, and close properly with a good seal, the windowsills and frames should be free of rot, and the screens should be present and intact. Besides looking for cracked or broken glass, make sure there are no broken seals. All doors should open and close properly with a good seal to ensure efficiency with heating and cooling.

5. Siding, trim, gutters and paint Your inspector will check for bubbling or peeling paint. You should also check all shutters, and trim as well as the gutters for overall condition. Make sure the gutters are securely attached to the house, and not rotting.

6. Decks and porches Be especially careful to inspect these areas for insect damage, as they are most vulnerable. Rotting from moisture is also a big issue in these areas.

7. Walls, Floors and Ceilings Check all of these areas for water damage- look for stains, or mold. Areas around plumbing fixtures should be thoroughly looked at for water damage. Check any gaps or cracks in exterior walls for the presence of insects.

8. Appliances Check the working order of all appliances. Typically your home inspector will run one dishwasher cycle and check the functions of the oven and stove. Many inspectors will not run the dishwasher, however, and most will not check the washer or dryer.

9. Electrical, Heating and Cooling Systems The inspection of these vital areas will give you an indication of how well your home has been maintained. The inspection of the electrical system will test all outlets, light fixtures and circuit breakers. Updated features in older homes, such as GFI outlets in the bathrooms and kitchens, will also be noted. When checking the heating and cooling systems, inspectors typically test the furnace, monitor the response of the thermostat for heating and cooling, and assess the overall ventilation of the home.

10. Plumbing The plumbing system will be checked for leaks around all fixtures and pipes. Hot and cold water pressure will also be checked by turning on multiple faucets. The bathrooms will be thoroughly inspected for water damage around the tub, sink, showers and toilets. The hot water heater will also be inspected to be sure it is up to code and functioning properly.

11. Basement The most important thing to check for in the basement is the presence of water, or water damage. If the area does occasionally flood, a sump pump should be present, and this will be checked to be sure it is functioning.

12. Chimney and Fireplace The Chimney and Fireplace will both be checked for loose bricks and mortar, the overall condition will be assessed, and the chimney will be checked to make sure there are no obstructions within it.

Remember, the home inspection is an invaluable step in the home buying process that will help you determine the value of the home and prevent you from overpaying or experiencing unwanted, and unplanned for repairs. Depending on what is uncovered during the inspection, you may want to pursue further evaluation by a specialist in a given area, or you may want to work with the seller to resolve the issue as part of your offer.

Helpful Links for First-Time Home Buyers

First-Time Homebuyer Tax Credit

Kris Barnett

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