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Issue Date: March 2009


Homebuying 101 First-timer’s Tip Sheet

Everything you need to know to buy your first home
by Karen Fuller
With all the recent challenges in the nation’s economy, you may be wondering if the time is right to invest in real estate. Rest assured, the current economic trend is spelling good opportunity for homebuyers across the nation, and Northeast Ohio is no exception. In particular, first-timers who don’t have property to sell before they buy have a great advantage.

“Affordability is at a record high,” says Dianna Hosta-Stickney, 2009 chairwoman of the Cleveland Area Board of Realtors (CABOR) and licensed real estate consultant with ReMax Pros in Westlake. She says for first-time buyers, the market is hot, and misconceptions that money is not available for financing should be dispelled. “Money is available. Banks are making loans.” In fact, the process is no different than it has been for the past 25 years, and it may be even smoother since there is less competition for money from other buyers. In short, realtors and lenders are more motivated than ever to work for you.

In this buyer’s market, you can count on getting some long-term, personal attention from your realtor. “It’s a wonderful time for the buyer-agent relationship,” says Lucinda Sharp-Gates, a real estate educator with Gates Real Estate Concepts and an agent with Sharp Concepts Realty. “We get an opportunity to really focus on our buyers, helping build their trust in us. And it’s a great time for us to rekindle relationships with former clients, too.” The slower pace allows more time than usual to work together and for realtors to get to know buyers’ needs.

Don’t worry about overpaying for a home with today’s economy being so unstable. Instead, get out there and make this market work to your advantage. Hosta-Stickney likens the real estate market to the stock market. “You have to look at it long term, over many years. It goes up and down. And when it’s down, it’s a great time to buy.” But she also says to look beyond the investment aspect and remember that when you buy a home, you are purchasing shelter for you and your family. Not only will it appreciate over time, but you will be living life, creating memories and making your home during that time as well.

To give you a head start on your home search, we’ve gathered a baker’s dozen of insider tips from our CABOR pros:

Weigh your options.

Hosta-Stickney says: “If you live in an apartment, you’re in a prime position to take advantage of this market. Before you do, conduct a rent vs. own analysis to see your personal tax benefits of owning over renting.” She says a real estate professional or lender can help with this.
Arm yourself with information and a great team.
Know your credit score, get preapproval, narrow down your search and commit to a reliable realtor and lender. “There are so many homes on the market right now, you must have a clear idea of what you are looking for and build a team of pros to help you stay focused. That way you’re sure to have a productive, satisfying shopping experience,” says Sharp-Gates.
 
Save while you shop.
If you start putting aside as little as $300 to $500 per month, you could save enough for a down payment on a starter home. Since it can take a year of planning, prescreening, house shopping, inspections and paperwork, you can get started right away and save while you’reshopping.
 
Down-payment relief
Don’t be intimidated if you think you don’t have enough of a down payment to get a loan. You can purchase a home with as little as 3.5 percent down. “Just because this is a turbulent market doesn’t mean you need to save 10 to 20 percent for your down payment,” says Hosta-Stickney. Financing will vary based on credit scores and the type of loan package you’re seeking.
 
Plan for future incidentals.
If you’re moving from an apartment to a home for the first time, don’t forget you’ll need to plan funds for things like a lawnmower, rake, snow shovel and garbage cans. Home ownership is different from renting, so prepare yourself.
 
Get the warranty.
In today’s market, negotiation is key. A buyer can always ask a seller to provide a home warranty as part of the contract negotiation. That way, if the water heater breaks just before your first shower in your new bathroom, you’re covered.
 
Best time of year to buy
The best time to buy is when you’re ready. Realtors work 12 months out of the year. Houses are always selling, it’s not true that you have to wait for spring. But if you’re planning to be in a certain school district by the end of August, you need to start putting your puzzle together in February.
 
Get out there and see for yourself.
Go out and experience this market for yourself. Go to open houses, get information on realtor.com, read the real estate listings in the paper, and start doing some research. But the best way to really get the details is with your local real estate agent. “Real estate is local,” says Hosta-Stickney. “Get to know a local realtor, and tell them what you’re looking for. We are here to serve the community, and we would be happy to share information with you.”

Sweat equity
Many first-time homebuyers are Generation Xers who want to move in, store their stuff and go out and live. If you don’t mind putting in a little work, you can get a great deal on a home that needs updating — homes that might be off the radar of other GenXers. Sharp-Gates explains: “If you can look past décor to see potential — and especially if you’re handy about doing home projects — you can get a great deal on a home, put a little sweat equity into it and have the home of your dreams for less.”
 
Is a foreclosure for you?
Sharp-Gates cautions first-time buyers to have realistic expectations about foreclosures. “There are some beautiful deals to be had on these homes,” she says, “but very often, these properties have been abandoned emotionally long before they were abandoned physically.” That can mean that lots of TLC is needed to bring them back to livable conditions. It takes a specific buyer to see the potential and know how to turn a foreclosure around.
 
Credit checks
Don’t be afraid of having your credit checked. It’s usually painless — most bumps and blips can be worked out with a little time and expert help.
 
Board membership
Be sure the agent you choose is in good standing with his or her local real estate board.
 
Find out about fees.
Be sure to ask your agent/real estate company if they charge a processing fee. Some do and some don’t, so be a smart consumer and find out up front. Surprises are fun for birthdays, not for real estate transactions.
 
Community programs
Check with the community to which you want to move to find out if they offer homebuying incentives. These case-by-case, city-run incentives can include down-payment assistance and grant money for rehab projects. The financial assistance can make a difference in affordability and might help you make a decision about where to buy. 
 
All this and a tax break, too
If this market isn’t incentive enough for first-time buyers to take the homebuying plunge, consider the government tax incentives. Here is a quick rundown of the Housing Stimulus and Recovery Act of 2008.

HOUSING AND ECONOMIC RECOVERY ACT OF 2008
First-time Homebuyer Tax Credit Feature, H.R. 3221

Amount of Credit
Ten percent of cost of home, not to exceed $7,500
Eligible Property
Any single-family residence (including condos and co-ops) that will be used as a principal residence
Refundable?
Yes. Reduces income tax liability for the year of purchase. Claimed on tax return for that tax year.
Income Limit
Full amount of credit available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return). Phases out above those caps ($95,000 and $170,000, respectively).
First-time Homebuyers Only
Purchaser (and purchaser’s spouse) may not haveowned a principal residence for 3 years previous to purchase.
Recaptured Home?
Yes. Portion (6.67 percent of credit) to be repaid each year for 15 years. If home sold before 15 years, then remainder of credit will be recaptured on sale.
Effective Date
Purchases on or after April 9, 2008
Termination
July 1, 2009

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