Tips For First Time Buyers

Are you a first time buyer and currently looking to purchase a house? Here are some of the most helpful tips in becoming a homeowner for the very first time.

Check the selling prices of comparable homes in your area. Web sites such as Zillow and Homegain can give you a general idea of what you should expect to pay. You can also do a quick search of actual MLS listings in your area on a number of Web sites, including the site of the National Association of Realtors.

See what you can afford. Use Bankrate’s  mortgage calculator to see what your payment would be. To get a sense of the maximum you should spend, use MSN Real Estate’s home affordability calculator.

Find out what your total monthly housing cost would be, including taxes and homeowners insurance. To get a feel for the maximum amount you should spend, including taxes and insurance, use MSN Real Estate’s home affordability calculator. In some areas, what you’ll pay for your taxes and insurance escrow can almost double your mortgage payment. According to the Insurance Information Institute, the average yearly premium can range from $477 in Utah to $1,372 for unlucky Texans.

Find out how much you’ll likely pay in closing costs. The upfront cost of settling on your home shouldn’t be overlooked. Closing costs include origination fees charged by the lender, title and settlement fees, taxes and prepaid items such as homeowners insurance or homeowners association fees. You can see what closing costs average in your state by looking at Bankrate.com’s annual closing cost survey.

Look at your budget and determine how a house fits into it. Fannie Mae recommends that buyers spend no more than 28% of their income on housing costs. Go much past 30% and you risk becoming house poor.

Talk to reputable real-estate agents in your area about the real-estate climate. Do they believe prices will continue falling or do they think your area has hit bottom or will rise soon?

Remember to look at the big picture. While buying a house is a great way to build wealth, maintaining your investment can be labor-intensive and expensive. When unexpected costs for new appliances, roof repairs and plumbing problems crop up, there’s no landlord to turn to, and these costs can drain your bank account.

So consider whether you’re ready for the expense and effort of homeownership before pulling the trigger.

Tips for First Time Home Buyers

Mortgage Rates on the Decline

It’s no secret that mortgage rates have been on the rise over the past few years. However now is the time to get back into the pool, as rates seem to be on the decline once again.

Both Freddie Mac and the Mortgage Bankers Association reported that all mortgages rates declined for the week the decreases were very modest.

The Mortgage Bankers Association also reported across-the-board declines. 30-year and 15 year rates were 5.74 and 5.31 percent, down from 5.75 and 5.33 percent respectively. The one-year ARM declined .01 to 4.14 percent.

MBA reported that the Market Composite Index, their measure of mortgage loan application volume, increased 0.2 percent on a seasonally adjusted basis and 0.7 percent unadjusted from the previous week but was still 8 percent lower than at the same time in 2004.

Refinancing applications as a percentage of total mortgage loan activity declined very slightly from the previous week, to 39.1 percent and the ARM share of loan activity also decreased to 33.4 percent of total applications from 34.7 the previous week.

In other news, Freddie Mac reported that total refinancing activity declined during the first quarter of 2005 but the percentage of homeowners who chose to use their refinance to draw equity out of their homes jumped sharply.

During the last quarter of 2004, 56 percent of refinances resulted in mortgages that were at least 5 percent greater than the loans that were being refinanced. In Q1 of 2005 that number rose to 65 percent. This represents the highest percentage of cash-out refinancing since the fourth quarter of 2000. Total equity cashed out in the quarter was estimated at $46 billion, up from the revised cash-out estimate of $41 billion in the last quarter of 2004.

Freddie Mac’s deputy chief economist Amy Crews Cutts estimated that there would be a total of $112 billion in cash drawn down from home equity by first lien refinances in 2005.

In the first quarter the median ration of old-to-new interest rates was 1.13, meaning that new mortgages carried a rate 13 percent lower than the mortgage that was refinanced.

Homeowners refinancing during this period saw a median house-price appreciation of 16 percent during the period they held the original loan. The median age of the loan being refinanced was 2.4 years.

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