Common Q & A About Buying Your First Home

Which lenders offer FHA loans?

Lenders who handle FHA loans typically advertise in the Yellow Pages under "real estate loans" and in the real estate sections of newspapers.

Are there low-down payment home loans?

Numerous programs exist to help first-time buyers purchase a home. A host of private lenders offer low-down-payment loans.

The U.S. Department of Housing and Urban Development offers a variety of programs through the Federal Housing Administration that require approximately 4 to 5 percent cash down. Loan limits vary depending on the county where the property is located.

In February 1994, Fannie Mae launched a pilot program allowing people to buy with just 3 percent down payments. For details, borrowers should contact lenders who offer government-insured loans.

Fannie Mae's Community Home Buyers Program has an income cap of 120 percent of the area's median income. The borrower also must attend a seminar on home ownership and the home buying process. It is not geared only for first-time home buyers, unlike many of the other low -down payment programs on the market.

 

What are the benefits of seller financing?

Seller financing offers benefits to both buyers and sellers including tax breaks for the seller, as well as offering an alternative when conventional loans can't be found.

The risks involved are the same risks facing any lender. Is the borrower a good credit risk? Will the property hold enough value over time to allow for the repayment of all loans made against it?

Sellers should run a full credit check on the borrower, require hazard insurance on the property and include a due-on-sale clause. There also are financing disclosure and repayment term requirements that should be met.

 

Can you negotiate the price on new homes?

It can be difficult to negotiate the sales price with a developer because they may claim their prices are based on fixed construction costs. However, it doesn't hurt to try. Experts say any offer is more likely to be considered if it comes in early in the selling process, when developers hope to move people in quickly so the project picks up momentum.

Conversely, developers may be more inclined to accept lower offers later in the project when only a few units remain. At that point, they want to close the sales office and move on to something else.

If negotiating the price doesn't work, buyers commonly negotiate for better amenities (upgrade carpet, light fixtures, etc.) or lot location. Experts say a developer will rarely pass up a deal over a couple hundred dollars' worth of carpeting, for example.

 

What exactly is bad credit?

There are numerous types of credit report problems (which may or may not be your fault) that would cause a lender to reject your application for a loan, says Ilyce R. Glink, author of 100 Questions Every First-time Home Buyer Should Ask, Random House, New York; 1994.

Among the problems she cites are missing a credit card payment, defaulting on a prior loan, filing for bankruptcy in the past seven years or not paying your taxes.

Other black marks on a credit report include a judgment filed against you (perhaps for non-payment of spousal or child support) or any collection activity.

If you feel that your credit report is wrong, experts say it's best to take it up with the organization or company claiming you owe them money.

But if you've been late paying your bills, regroup by paying in full and on time for six months to a year to prove to the lender that the late payments were an aberration, Glink says.

 

How does someone sell a slow mover?

Even in a down market, real estate experts say that price and condition are the two most important factors in selling a home.

So, the first step is to lower the price. Also, go through the house and see if there are cosmetic defects that you missed and can be repaired.

Secondly, home sellers should make sure that the home is getting the exposure it deserves through open houses, broker open houses, advertising, good signage and a listing on the multiple listing service (MLS).

Another option is to pull the home off the market and wait for overall housing conditions to improve.

Finally, frustrated sellers who have no equity and are forced to sell because of a divorce or financial considerations could discuss a short sale or a deed in lieu of a foreclosure with the mortgage lender.

A short sale is when the seller finds a buyer for a price that is below the mortgage amount and negotiates the difference with the lender.

In a deed-in-lieu-of-foreclosure situation, the lender agrees to take the house back without instituting foreclosure proceedings. But these would be considered more radical options than lowering the price.

 

What are nonrecurring closing costs?

Sellers sometimes pay for all or a portion of the closing costs involved in the sale of a property, depending on local real estate market conditions, other terms of the purchase contract, the seller's cash and timing considerations.

Seller concessions, as they are known in real estate jargon, for at least part of the closing costs are more common in a buyer's market than in a seller's market. These concessions will typically be agreed upon during the offer- counteroffer-acceptance cycle, though sometimes a seller will make further concessions during the escrow process. Such concessions would generally be acknowledged in the form of an addendum to the purchase contract.

In addition, most lenders will allow a credit from the seller to the buyer for the buyer's nonrecurring closing costs. But they usually won't allow a credit that reduces the amount of the buyer's down payment, or that includes any of the buyer's recurring closing costs, which include such expenses as fire insurance premiums, interest on the buyer's new loan, property mortgage insurance and property taxes. Lenders’ policies vary on how large a credit for nonrecurring costs they'll allow.

What is the difference between market value and appraised value?

An appraisal is "an estimate of a property's monetary value on the open market; an estimate of a property's type and condition, its utility for a given purpose or its highest and best use," according to Charles O. Stapleton III, Thomas Moran and Martha R. Williams, authors of "Real Estate Principles," 3rd Ed., Dearborn Financial Publishing, Chicago; 1994.

Comparative market analysis is an informal estimate of market value performed by a real estate agent or broker. It is based on like sales and generally offers a range of values including probable market value.