Brooklyn Real Estate Q&A and Info

Well, as many had hoped, the First Time Home Buyer Tax Credit has been extended until April 30, 2010!

To recap what the credit is, it is a dollar-for-dollar reduction in what a taxpayer owes in taxes. For example, if you owe $8,000 in income taxes and you are eligible for the full $8,000 home buyer’s tax credit, you would owe absolutely nothing in federal taxes.

Its still a great time to buy.  Interest rates are still low and housing prices in Brooklyn are either flat are have risen slightly.   If you are looking to buy a house, condo or coop, give me a call and let me help you take advantage of the free money the tax credit represents.

With the difficulty some buyers are having getting financing, and Condos and other new constructions in Brooklyn sitting empty, rent-to-own has become an option available for some buyers. But what is rent-to-own?

The rent-to-own scenario, which is also called a “lease-option” requires a potential buyer to pay a down payment of as much as 5% of the purchase price up front and pay rent monthly while they live in the property he or she intends to buy at the end of the lease.

Part of the rent goes to the owner, and a portion of the rent, called a “rent credit”, goes into an escrow account and is later applied toward the purchaser’s down payment when he or she is ready to buy.   The price the buyer will pay for the house or condo at the end of the lease is determined at the time the “rent-to-own” or “lease option” contract is signed.

The PROS

1. Its a great way to get into a house or condo that you like now without having a large down payment.
2. It gives you an opportunity to “try” before you “buy”.
3. It gives you time to make repairs to your credit rating if its necessary.
4. The owner is obligated to sell the property to you at the price agreed upon, even if the property increases in value.

The CONS

1. If you decide not to purchase the property at the end of the lease, you loose the down payment you put into the transaction at the start of the lease, however the rent credit monies that has accumulated in the escrow account is refunded.
2. If the property decreases in value, you are required to pay the price agreed upon at the signing of the lease, even if the property is worth less.  If the property does not appraise for the amount agreed upon, you may not be able to get a loan and fail to be able to close on the deal, again loosing you down payment money.
3. If the owner of the property fails to pay the mortgage and the property is foreclosed on, you may loose all the money put into the transaction.

As you can see, there are advantages and disadvantages to purchasing property rent-to-own.  Weigh the pros and cons carefully, and if you decide that rent-to-own is right for you, find out as much as you can about the owner’s financial situation, vigorously negotiate the price to be paid, and have a Real Estate Attorney thoroughly review the lease option contract before you sign it.

For more information about rent-to-own (lease-option) properties available in Brooklyn.  Please feel free to contact me using the phone number below, or via email.

Here is an interesting article I came across on the WSJ online about seller financing.

Seller financing is when the seller of the property holds the mortgage for the buyer instead of a bank or some other lending institution. If you own your Brooklyn, New York home outright and you currently don’t need the equity from the house, seller financing might be an option for you.

There’s a lot of positive real estate related news this week.  Several real estate market indicators are positive for the first time in a long time.  Take a look:

Exisiting Home Sales Up by 7.2%  according to the National Association of Realtors

New Home Sales Up almost 10% according to the Commerce Department.  That is the biggest monthly change since 2005.

Case-Schiller Home Price Index’s National Composite is up 2.9% in the second quarter of this year over the first quarter. This is the first quarter to quarter increase in over 3 years according to the Commerce Department.

Mortgage Applications up 7.5% last week according to the Mortgage Bankers Association.   30 Year Fixed Rate Mortages average 5.2% and 15 year fixed Rate Mortages average 4.6%.

That’s a lot of good news.  Does this mean we are out of the woods and the happy days of house prices soaring are close at hand?  No, not really.  With national unemployment close to 10% and an estimated 3 million houses going into foreclosure this year alone, the real estate market still has a long way to go before we see wholesale price increases and the booming sales we had before the housing bubble burst. 

However, with interest rates low and housing prices depressed, its a great time to buy if you have the credit score, income and downpayment.  If you’re interested in buying, please feel free to give me a call – 917-544-2662.

One of the first things any home buyer should ask him or herself is how much of a down payment is he or she is going to need to buy a house, condo or co-op.  Fortunately, figuring that out is easy.

There are two types of mortgage loans that are available in these tough economic times, the FHA Loan and the Conventional Loan.

FHA mortgage loans are loans that are insured by the Federal Government and allows anyone who meets certain qualifications to put a minimum of  3.5% down on a house or a condo (Co-ops cannot be purchased with FHA loans).

Here are some examples of how much of a down payment you’ll need if you want to purchase a property using an FHA Loan:

Conventional loans are loans made through lending institutions such as banks and credit unions. Most conventional loans require that you put a minimum of 10% down and, depending on your credit score, you may be required to put down even more.

Here are some examples of how much of a down payment you’ll need if you want to purchase a property using an Conventional Loan:

As you can see from the information above, figuring out how much you’ll need for a down payment is simple.  Of course, if you can put down more then the minimum amounts, that’s terrific.  The larger the amount of your down payment, the less your mortgage will be.

Besides determining whether or not you want to own a house and can you afford mortgage payments, ”do I have enough for a down payment?” is the next most important question any first time home buyer should ask him or herself.

What’s the Down Payment For?

The theory is that when a borrower puts a significant amount of their own money into the purchase of a house, they are less likely to “walk away” from their obligation to repay the mortgage because they don’t want to lose their own money.

An example of that would be, a person buys a $500,000 piece of property.  If they put 10% or $50,000 of their own money towards the purchase, when things get tough, they are less likely to let the loan default.  Why?  Because not only will they loose their place of residence, they will also loose their $50,000 dollars, and that kind of money’s not easy to come by for most of us. 

The recent crash in the housing market where 0% financing was running rampant has proven the above theory to be a sound one.  I was told by a fellow realtor of a client who had purchased a home with 0% financing who walked into the bank he borrowed the money from, put the keys to the house on the loan officers desk and said, “Here you can have your house back.”   He was having a hard time making the payments and decided to simply walk away from the house.  True, his credit would be trashed, but since he put no money into the house, he didn’t loose any.  0% financing is a thing of the past, for now.

How Much Down Payment Money Do I Need?

Today in 2009, with the exception of an FHA loan where you can put 3.5% down on a piece of real estate, most lending institutions require that you have at least 10% of the purchase price to put down when you want to buy a house, condo or co-op.  In some circumstances a lender might require even more.

So, if you want to purchase a co-op in Brooklyn for $200,000 and 10% down is required, you will need at least $20,000 for the down payment. (FHA loans are not available for co-ops)

If you want to buy a house for $400,000 and you qualify for an FHA loan, you will need at least $14,000 or 3.5% of $400,000 for a down payment.

So, before you start searching craigslist.com or going to open houses, or you make that call to your local realtor, you have to have enough money for a down payment before you can purchase that dream home.

If you would like more information about down payments or house buying in general, feel free to give me a call.

If you’re a first time home buyer who has been waiting to make that first purchase, don’t wait any longer or you might miss the low interest rate boat.

Mortgage rates rose for the third time in three weeks.  In the last three weeks the average rate for a 30 year fixed rate loan made a leap from 4.62% to 5.67%.   Ok, that doesn’t really seem like much.  Lets do the math….

If you’re borrowing $200,000 at 4.62% for 30 years, your monthly payment will be $1027.68 a month.  At 5.67% it will be $1157.00, that’s about $130 dollars in additional money you’ll owe the bank each month.   Over the life of your loan you’ll be paying the bank $46,800 more then you have too.  I don’t know about you, but I can find a lot of things to do with that kind of money besides giving it to the bank (how about a trip to Hawaii).

Don’t keep waiting.  If you’ve got the financial situation you need (decent credit, down payment money and a stable job with good income) go ahead a buy your first house, condo or coop!  If you’re not sure if you have the financial situation you need, give me a call at the number below or click here to send me an email. 

Don’t hesitate any longer, let me help make finding your first home as easy and as stress free as possible, and I’ll do it with a smile.

If you are a first time home buyer in Brooklyn, New York (or anywhere for that matter) who is shopping for your first home and need to get a mortgage to pay for it, you’ll want to know about a Good Faith Estimate. 

What exactly is a good faith estimate and why should you absolutely want one?

A Good Faith Estimate is an estimate of all the costs associated with a mortgage.  These costs include your interest rate, any points, and lenders fees.   If you go to a loan officer at a local bank or a mortgage broker and he or she qualifies you and quotes you a rate, a payment, and your total costs, he should be able to give you a good faith estimate in writing on a standard form.

Don’t find out about some hidden fee or the fact that the rate quoted you was for an adjustable rate mortgage at closing.  By law, your lender must provide you with a good faith estimate, be it an FHA or conventional one, so it is important that you obtain one and read it carefully.  If there’s anything on it you don’t understand, ask your loan officer to clarify it.

In 2010 new laws will go into effect making the good faith estimate even more informative for borrowers.  Take a look at this New York Times article for more details.

After you’ve read your good faith estimate carefully and you’ve gotten a good explanation of all the charges on it and you’ve found them to be acceptable, you can be confident that you won’t get any unpleasant mortgage related surprises later on.