Tag Archive for first time homebuyer

What’s a Buyer Letter?

What’s a buyer letter?  A buyer letter is a short letter from the buyer written to the seller.  It simply gives a short description of the buyer(s) and explains their interest in the seller’s home.  In the recent months we’ve seen many first time home buyers utilize this tool.

Do I have to submit a buyer letter?  You definitely don’t need to submit a buyer letter.  Some buyers don’t want to disclose their personal situation.  However, especially in many first time home buyer demographics where we’re seeing multiple offers and bidding wars, buyer letters can really make a difference.

Doesn’t the seller just care about the purchase price?  Not necessarily.  To most sellers, selling their home is more than just a financial transaction, it’s also an emotional process.  Many sellers may be drawn to a specific buyer that they can relate to, may it be through their hobbies, families or career paths.  Also, many sellers may feel for first time home buyers just starting out.

Are there any down sides to writing a buyer letter?  Generally, no.  There is no cost or down side to writing a letter to the seller.  It takes five minutes of your time, and we suggest all first time home buyers utilize this strategy.  Just keep it to a couple paragraphs, as the seller doesn’t necessarily need to know your life story.

Don’t make the biggest financial decision of your life without getting educated!  If you’d like to learn more about the first time home buyer process in general, please go to our Calendar/Reservations page and register for one of our FREE First Time Home Buyer workshops.

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FHA vs. Conventional Financing

Whether you are a First Time Homebuyer or have previously owned a home, an FHA loan may be the right choice to buy your single family residence, condominium or townhouse. FHA is a government backed program and stands for Federal Housing Administration. FHA offers great interest rates on 30 year fixed rate loans and Adjustable Rate Mortgages making owning a home much more affordable than many people might think. FHA allows buyers to secure great financing by charging borrowers an Up Front Mortgage Insurance Premium of 1% of the loan amount (which is tacked onto your loan balance and paid off over 30 years). There is also an annual Mortgage Insurance Premium which is broken down and paid on a monthly basis. That premium starts at 1.15% of the loan amount annually (and decreases as the down-payment increases). The minimum down-payment is 3.5% of the purchase price for the home.

Now for how a conventional loan works… Conventional loans are not backed by the government. They are also a great fit for many buyers whether first time homebuyer or not, buying a single family residence, condominium or townhouse. Conventional lending offers great fixed and ARM programs just as FHA financing does. Conventional lending does not have the backing/insurance of the government against a potential default of the loan. Therefore if a person is putting a down-payment of less than 20%(no mortgage insurance necessary over 20% down with conventional), there will be a different type of Mortgage Insurance secured. These mortgage Insurance programs come with a much wider array of structures. With Conventional, there is no mandatory up-front Mortgage Insurance Premium. There is an annual Mortgage Insurance Premium broken down and paid monthly. There are also programs available where the lender will pay these premiums for you in exchange for a higher interest rate on the loan, or even programs where the buyer can pay the premiums up front in full or partially. The minimum down-payment for conventional lending is 3%. However at a 3% down-payment, securing mortgage insurance can prove to be difficult and expensive. A popular down-payment amount for conventional lending begins at 5% where the mortgage insurance is more easily attainable and less expensive.

Here are a few key points in determining whether FHA or Conventional is best for you… FHA financing is generally more lenient on credit ratings, income history and debt to income ratios. It is generally easier to navigate through the FHA underwriting process. If a borrower has a marginal credit rating, a relatively high debt to income ratio or an unstable work history an FHA loan will most likely be the best option for them over a conventional loan. On the positive side for conventional lending, if a borrower has a good credit rating, a stable employment history and a relatively low debt to income ratio there will often be some Mortgage Insurances choices for them that will be beneficial over the FHA’s Mortgage Insurance program.

While the above information gives you some idea of the differences, comparing FHA financing against Conventional financing is something that should be seriously considered on a case by case basis. There are many factors that need to be taken into consideration in determining which type of financing will best suit your needs/goals as a homebuyer. If you would like to learn more about financing options, please go to our Calendar page and reserve a spot in one of our FREE First Time Home Buyer seminars.

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Is New Construction My Best Option?

In the Seattle area, generally speaking there are three eras of homes. These eras include pre-war construction, mid-century construction and newer construction. We don’t see much construction earlier than about 1890, due to the Great Seattle Fire of 1889. Pre-war construction is generally thought of as 1939 and older (before World War II); mid-century runs from the 1940′s up to the 1970′s; and I consider newer construction from the 1980′s on up.

Each of these eras can have different connotations for first time home buyers. Many people appreciate pre-war construction for the quality of construction and all their period details. Although they are generally built exceptionally well, the systems are often close to a hundred years old and include things like knob and tube wiring, galvanized plumbing and coal heating systems. Sometimes these systems have been maintained impeccably, however often they need to be completely replaced. This may be quite a large undertaking for a first time home buyer.

Mid-century construction was also generally very well built, but the systems are only half as old as their pre-war counterparts. Especially once you get into the 1960′s and 1970′s homes, you will often see newer romex wiring, copper plumbing and electric furnaces. These homes have withstood the test of time, while still having systems that may not need to be replaced right away if maintained properly. Therefore, mid-century inventory may be a more affordable option for first time home buyers in the short-term.

Newer construction is often preferred by first time home buyers, because they have the newest systems of all. Often these include romex wiring, plastic plumbing, and gas or radiant heating systems. It is true that the systems may need to be replaced a lot less sooner than pre-war, or mid-century inventory, however in the late 1980′s many construction materials took a turn for the worse. Materials like old growth wood started to become harder to come by and more expensive, so other more affordable alternatives came to market. Some of these materials such as OSB siding have shown that they are not the dependable construction materials they claimed to be. Because of this it is possible that newer construction overall may not last nearly as long as other options.

The fact of the matter is, every era of home comes with pros and cons. It just depends on what your priorities are and what types of projects you are willing to undertake. Also, there are always exceptions to the rules. So just because a certain era of home is typically built well, it doesn’t mean that every single home from that time period was well built. Furthermore, if a home was built well but poorly maintained, the house may not be worth trying to salvage. Especially if it is your first home and there are major rot, mildew or other types of moisture problems that have arisen from neglect. Quite often it comes down to a case by case analysis. You have to look at every home on an individual basis, and then compare it to your overall options.

If you’re thinking about buying your first home in the Greater Seattle area and would like to gather more helpful information before making your decision, please go to our Calendar page and register for one of our FREE First Time Home Buyer seminars.

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