Archive for November 27, 2013

I Want an Ugly House for Christmas

I want to buy an ugly house.  We hear this from a lot of first time home buyers.  It’s generally an approach for people that want to be in a particular neighborhood, but are constrained by price.  So they look for an ugly house so they can get a better deal and do repairs after closing.  This can be a fantastic idea as long as you know what you’re getting into.

What do I need to know?  Even if you’re a contractor or just very handy, banks generally won’t lend money against a house that has structural issues.  Because of this, first time home buyers may want to narrow their search to only include properties that need cosmetic repairs as opposed to structural repairs.  If you’re considering a rehab loan, they have a lot of other caveats so we’ll save that discussion for another blog.

So I’ll just target cosmetic fixers then.  Hold on now, it also depends on what type of financing you’re using.  FHA can be a great option for first time home buyers.  However, they are often more stringent in regards to property condition than conventional loans.  So if you’re using an FHA loan, you could be excluded from buying cosmetic fixers with minor issues like pealing paint, or even a broken window pain.  This is why it’s imperative to align yourself with a real estate professional that understands the different types of financing guidelines.

If the bank won’t loan me the money, then I’ll just find another house.  It’s usually true that if the bank won’t give you a loan (depending on how the contract’s written), you can exit the contract and retrieve your earnest money.  However, there are some upfront costs involved like paying for a home inspection and ordering the appraisal, that have to be paid regardless of whether or not the loan closes.  This amount is generally some where between $1200-1500!  You don’t want to have to pay this money up front unless you’re pretty confident you can get the loan.

Don’t make the biggest financial decision of your life without getting educated!  If you’d like more information on buying a fixer, or the home buying process in general, please go to our Calendar/Reservations page and sign up for one of our FREE First Time Home Buyer workshops.


What are USDA Loans?

What is a USDA loan anyway?  USDA loans are specifically designed for purchasing homes in rural areas.  Some of the areas in Western Washington that are considered rural by USDA guidelines may surprise you.  In many cases first time home buyers looking for the suburban lifestyle are finding themselves purchasing homes in areas that can utilize USDA financing.

So what are some benefits of using a USDA loan?  Well, USDA’s monthly mortgage insurance is only one third of what FHA’s monthly mortgage insurance premium is.  Also, the interest rate for a 30 year fixed loan is lower with USDA than it is with standard conventional financing.  Another huge benefit for many first time home buyers is that with USDA, you can secure that low rate and the low monthly mortgage insurance with absolutely NO down-payment.  That’s right $0 down, so you can keep more money in your pocket!

What else do I need to know about the USDA loan?  First off, there IS an up-front Mortgage insurance premium that will be added to the loan amount of your 30 year fixed loan.  This up-front mortgage insurance is 15% higher than the FHA’s premium.  The next thing to know is that the monthly mortgage insurance, like FHA, will last for the life of the loan.  An additional major factor to consider is that there is a household income limitation.  Bottom line, there are a lot of different factors to consider.

Don’t make one of the biggest financial decisions of your life without getting educated!  If you would like to gather more information about down payment options or the first time home buying process in general, please go to our Calendar/Reservations page and sign up for one of our FREE First Time Home Buyer workshops.