first time homebuyer Archives - Page 3 of 6 - Real Estate News and Commentary

March 17, 2018December 13, 2022

Home buyer savings account?

Maryland first-time home buyers may soon have another program to help them buy a home. Two related bills are making their way through the Maryland General Assembly to create a first-time home buyer savings account. If enacted, Maryland would join a handful of other states that have already enacted such programs to incentivize home buying.

The bills are an effort to address the lack of first-time home buyer participation in the housing market. The lack of first-time home buyer participation has received a lot of attention since the Great Recession. Not just because of the rising costs of buying a home, but also because of the lack of home buyer savings. The lack of down payment was identified by the National Association of Realtors as one of the issues barring first-time home buyers from entering the housing market. The October 18th 2016 NAR news release (Five Notable Nuggets from NAR’s Home Buyer and Sellers Survey’s 35-Year History; realtor.org) also cited underemployment, student debt, and delayed family formation.

The idea of a home buyer savings account is not new. It was first conceived by Montana in the 1990’s as an incentive for home buyers to save money for down payment and closing costs. Virginia was the second state to enact a similar program in 2014. Several other states have since enacted similar plans, while others (including Maryland) have proposed such plans in their respective state legislatures.

The increased attention to first-time home buyer savings account during 2017 has made it a hot topic. While states are looking to provide state tax breaks for first-time home buyers, Rep. Mike Coffman of Colorado wants to provide federal tax incentives to first-time home buyers for saving down payment and closing costs. H.R.2802 First-Time Homebuyer Savings Account Act of 2017 was introduced in Congress last June by Rep. Mike Coffman of Colorado, and co-sponsored by Rep. Sean Patrick Maloney and Rep. Barbara Comstock. The bill has yet to make it out of the House Ways and Means Committee.

Rep Coffman stated in a press release:

“The American dream of homeownership is getting harder and harder to attain for those starting out on their own these days, especially Millennials, because of the challenges involved in saving up for the down payment…The First-Time Homebuyer Savings Account Act is a straightforward and bipartisan solution to this problem. If we can help Millennials attain homeownership, this would not only be a wise financial move for them, but would have broader positive financial impact for our economy as a whole“

Maryland’s proposed first-time home buyer savings plan, introduced by HB0463 and SB0972, is currently being debated in the Maryland General Assembly. If enacted as introduced, the legislation would allow $50,000 to be deposited “state tax free” into an account for the purpose of buying a home in Maryland by a first-time home buyer. Any interest earned up to $150,000 would also be state tax free, as long as the interest is also used in said purchase. However, if the funds and interest are used for any other purpose, the holder of the account would be subject to state tax and penalties.

Would a first-time home buyer savings account stimulate interest in the housing market?

Lisa Prevost, writing for the New York Times, brought attention to Montana’s struggle to get first-time home buyers to participate in their savings plan (Tax Free Accounts for Homes: nytimes.com; August 8, 2013). At the time of Prevost’s article, the Montana Department of Revenue reported that “…no more than 225 people, and as few as 125, have participated annually since the program’s inception. Their annual deposits have averaged around $400,000.” Edmund Caplis, director of tax policy and research for Montana’s Department of Revenue, was quoted in the article as saying, “What you’ve got to understand is, this is people trying to get into their first home. For most working families, trying to pull together an extra buck is a stretch.”

By Dan Krell
Copyright © 2018

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

August 13, 2017December 13, 2022

Improving home buyer credit scores

There’s been a lot of anticipation about the new credit scoring model by VantageScore (vantagescore.com). It’s supposed to increase the availability of credit to many consumers. Launching this fall, VantageScore 4.0 is touted to be a more accurate scoring system that uses trending data instead of “snapshots.” This credit scoring system is also supposed to help those with limited credit, and incorporates the improved credit reporting standards included in the National Consumer Assistance Plan. This and other new scoring systems have a lot of promise, but will improving home buyer credit scores help the mortgage process?

Let’s take a step back to see how home buyer credit scores reporting has evolved in recent years. The National Consumer Assistance Plan (nationalconsumerassistanceplan.com) was launched in 2015 as a result of an agreement between the credit reporting agencies (Equifax, Experian, and TransUnion) and New York Attorney General Eric Schneiderman. The agreement stemmed from Schneiderman’s investigation into the credit reporting agencies’ practices including (but not limited to) the accuracy of collected data, the practices in handling consumer disputes, and the reporting of medical debt.

The National Consumer Assistance Plan’s focus is to improve the consumer’s experience as well as increase data quality and accuracy. Consumers will have increased information related to credit report disputes, including instructions on what to do if they’re dissatisfied with the result of their dispute. Additionally, there is an “enhanced dispute resolution process” for fraud victims.

Among the many changes made by the National Consumer Assistance Plan to increase accuracy and quality of data includes: issuing consistent standards for those who report data to the credit agencies; medical debt won’t be reported during a 180-day waiting period so as to allow for insurance payments to catch up with billing; and the elimination of reporting of debts that were not contractual (such as parking tickets).

From The National Consumer Assistance Plan:

Consumers visiting www.annualcreditreport.com, the website that allows consumers to obtain a free credit report once a year will see expanded educational material.
Consumers who obtain their free annual credit report and dispute information resulting in modification of the disputed item will be able to obtain another free annual report without waiting a year.
Consumers who dispute items on their credit reports will receive additional information from the credit reporting agencies along with the results of their dispute, including a description of what they can do if they are not satisfied with the outcome of their dispute.
The credit reporting agencies (CRAs) are focusing on an enhanced dispute resolution process for victims of identity theft and fraud, as well as those who may have credit information belonging to another consumer on their file, commonly called a “mixed file.”
Medical debts won’t be reported until after a 180-day “waiting period” to allow insurance payments to be applied. The CRAs will also remove from credit reports previously reported medical collections that have been or are being paid by insurance.
Consistent standards will be reinforced by the credit bureaus to lenders and others that submit data for inclusion in a credit report (data furnishers).
Data furnishers will be prohibited from reporting authorized users without a date of birth and the CRAs will reject data that does not comply with this requirement.
The CRAs will eliminate the reporting of debts that did not arise from a contract or agreement by the consumer to pay, such as traffic tickets or fines.
A multi-company working group of the nationwide consumer credit reporting companies has been formed to regularly review and help ensure consistency and uniformity in the data submitted by data furnishers for inclusion in a consumer’s credit report.

Recent credit reporting changes are sure to make an impact for home buyer credit scores. But, you may still have impaired credit that would make it difficult for you to buy a home. So how can you improve your home buying process? Be proactive!

A credit report contains a lot of information about you. It reveals your personal information, including where you’ve lived and worked. It indicates the credit cards and other loans you have, and how you pay on them. It may also include any collection activity against you, as well as bankruptcies, liens or judgements. Know what’s being reported about you by obtaining your free annual credit report (annualcreditreport.com) and dispute discrepancies. Successful disputes should improve your credit score.

However, if your home buyer credit scores are impaired as the result of poor habits, don’t despair. You can improve your credit report and score on your own by creating “good” credit habits. First: make sure you pay your bills on time. Planning specific times each month to pay bills will make it hard to miss a payment. Second: reducing credit card balances may improve your credit score. And third: be mindful of how many credit cards you maintain. Having too many credit cards could lower your credit score. Also, be careful to not apply for too much credit at any given time, as these “inquiries” could lower your score as well.

To learn more how a credit report functions, affects you, and how improve your home buyer credit scores, visit the Consumer Financial Protection Bureau (consumerfinance.gov), the Federal Trade Commission (ftc.gov), and the Federal Deposit Insurance Corporation (FDIC.gov).

Original published at https://dankrell.com/blog/2017/08/13/improving-home-buyer-credit-scores

By Dan Krell
Copyright© 2017

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July 9, 2017September 9, 2018

First time home buyer assistance

Are you a first time home buyer worried, overwhelmed, or intimidated by the process? You’re not alone. First time home buyers have had the most difficulty getting back into the real estate market after the Great Recession. Many would-be first time home buyers lack the financial resources, while others worry about the long term value. However, there is probably no better time than now to buy your first home.

This is a first time home buyer market

You may be one of the many would-be first time home buyers who opted to continue to rent or live with their parents until the timing was right. Many would-be home buyers did the same, as a 2106 Pew Research Center report pointed out the millennial housing trend that may be associated with the decline in the homeownership rate since the Great Recession (For First Time in Modern Era, Living With Parents Edges Out Other Living Arrangements for 18- to 34-Year-Olds; pewsocialtrends.org; May 24, 2016). However, economic factors have significantly improved, and the housing market has stabilized. So what’s holding you back?

Are you overwhelmed or intimidated by the home buying process?

Buying a home can seem intimidating, and overwhelming. But it doesn’t have to be. On the Holmes and Rahe Stress Scale (Holmes & Rahe 1967), having a mortgage over $10,000 rates 31 (just above being foreclosed upon) and moving is rated as 20. This commonly used stress scale is cumulative, so the rating for buying a home is at least 51. However, being prepared can help you anticipate and deal with most circumstances that may arise.

Finding a professional and competent Realtor who will “be” with you throughout the process is highly important. Of course, finding an agent whom you trust can be a process too. It’s important to know your agent will be there for you, not only to answer questions and resolve your concerns, but to also represent your best interests.

What are your expectations? Your home buying expectations are influenced by your experiences. However you are also influenced by a combination of the media, relatives, friends, and co-workers. Having very high and unrealistic expectations can not only increase your stress, but can but a wrench in the transaction before it starts. Discussing your expectations with your Realtor will determine if they are realistic or not.

Choosing your Realtor

Before deciding on the realtor you want to work with, informally talk to several about how they help first time home buyers. Unfortunately, home buyer surveys (such as the annual National Association of Realtors Profile of Home Buyers and Sellers (nar.realtor)) suggest that the majority of home buyers and sellers typically hire the agent they first encountered.

Besides assisting in home searching and negotiating sales contracts, your agent should be by your side throughout the transaction. Your agent should be available to you to help you maneuver the bumps and surprises that can derail your home purchase.

Even though you may not place an agent’s experience high in your list of agent characteristics, a research study by Bennie Waller and Ali Jubran (“The Impact of Agent Experience on the Real Estate Transaction.” Journal of Housing Research 21, no. 1 (2012): 67-82) suggests otherwise. They concluded that an experienced real estate agent can yield a better result than an agent with little or no experience.

Check your agent’s license. Make sure your agent is a full time agent (meaning that the only job they have is selling real estate). Don’t be shy about asking and calling your agent’s references.

First time home buyer down payment and closing cost assistance

If affordability, down payment and closing costs are a concern, apply for a first time home buyer assistance and/or grant program. There are many programs available offered through local and state organizations. Your lender can help you find and apply to the programs for which you qualify. Regular communication with your loan officer is important because the funding is limited annually and can quickly run out.

Locally, one of the mainstays for first time home buyer assistance is the Maryland Mortgage Program (mmp.maryland.gov). The MMP is provided through the Maryland Department of Housing and Community Development, and funded by the Community Development Administration. It is described as “…providing home loans and down payment assistance to Maryland’s working families to encourage responsible homeownership and build strong communities, working through a network of Maryland Mortgage Program lender organizations.”

MMP loans are just like other mortgages, except that they offer competitive rates and offer additional assistance in the form of Down Payment Assistance and Partner Match Programs (up to $8,500 from the Department and possibly more from partner organizations). Some Partner Match programs offer homebuyer grants. However, other Assistance programs are generally in the form of deferred, no-interest loans.

Combining Down Payment Assistance with a Partner Match program can significantly reduce the amount you need to buy your first home! The Down Payment Assistance program is a loan of up to $5,000. The loan is a zero-percent deferred loan, which is repaid when you pay off the main Maryland Mortgage Program mortgage when you refinance, or sell the home.

Department of Housing and Community Development has partnered with many organizations and employers that can provide you with additional assistance. Your current employer may be a participant with the Partner Match program (check the Partner list at mmp.maryland.gov). Local organizations also offer home buyer assistance (including the Moderately Priced Dwelling Unit Program) as well, such as the Housing Opportunities Commission (hocmc.org) and The City of Gaithersburg (gaithersburgmd.gov).

Original published at https://dankrell.com/blog/2017/07/09/first-time-home-buyer-assistance/

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July 7, 2016September 20, 2018

Home buyer life hacks

“Life hacks” have been trending everywhere the last few years, from the internet to social media. Life hacks are typically actions or “wisdoms” to make life easier. However, home buyer life hacks are not easy to find.

The home buying experience can be time consuming and stressful. Over time, the home buyer’s responsibilities change. In fact, the home buying experience has drastically changed in the last decade. Consider that mortgage programs and Realtor® contracts changed and continue to evolve. Which includes the TILA-RESPA Integrated Disclosure (TRID) rule that went into effect last fall, which changed how a transaction settles. Here are a five home buyer life hacks to make the experience straightforward and more enjoyable.

The first home buyer life hack is to learn about the home buying process. Certainly a must for first time home buyers. However, even experienced home buyers may find themselves in strange waters if they’ve not bought or sold a home in the last couple of years. Becoming acquainted with home buying process can help you anticipate and prevent most surprises that can upset the flow of the transaction.

Home buyer life hack number 2 – make a budget. Creating a budget may take the romance out of the buying process, but will help you with your home search and contract decisions down the road. Consult a professional if necessary. In making your budget, consider your income, debts and other financial obligations, as well as your life style. Make a housing budget that includes mortgage, property taxes, HOA or condo fees (if any), homeowner’s insurance, utilities and maintenance. In creating your budget, also consider future changes to income and home related cost increases.

Home buyer life hack number 3 – know what to expect from the housing market. Knowing whether the housing market is benefiting the seller or buyer can help decide on a winning home buying strategy. Understanding that a low inventory market may necessitate you and your agent to do a little more leg work to find homes for sale. Know the current housing trends for the neighborhoods you are perusing, so you can prepare for competition and multiple offer scenarios.

Home buyer life hack number 4 – hire a professional. The process isn’t rocket science, however, you can easily find yourself in over your head if you’re not experienced in buying a home in today’s market. Although some home buyers believe they can get a better deal by not using an agent to help them buy a home, it could end up costing more because of poor negotiating in price, home inspection, and other add-ons. Hiring a buyer agent can also free up time that is necessary to conduct the process. Experts know the market such that they can help you determine the best offer price. They can also package your offer in a way that facilitates the transaction.

Most home buyers will follow home buyer life hacks 1 through 4. However, they will take for granted that everything they are told is true. Which brings us to home buyer life hack number 5 – do your due diligence. As you can imagine, not everything you are told is true or depicted accurately. “Trust and verify” can help you identify and reduce hidden and obscure risks by verifying the truth. Conduct your due diligence throughout the home buying process; from the veracity of a seller’s statements about their home to vetting the professionals you hire.

Original published at https://dankrell.com/blog/2016/07/07/5-home-buyer-life-hacks/

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March 31, 2016September 17, 2019

Buyers and sellers – Mentally prepare to be in real estate market

Realtors® are guilty of romanticizing, if not glorifying, the idea of buying and selling a home. And it’s probably true for many, that initial thoughts of buying or selling a home (and everything that goes along with it) are sanguine. And yet, shortly after they are faced with details of the move, many are hit with the reality that the process is full of potential pitfalls and setbacks. Buying and selling a home can be a confusing endeavor, that can become overwhelming if you’re not mentally prepared.

Getting through the process of buying and selling requires organization and planning to seek the best outcome. As a home buyer you organize before viewing homes by having a mortgage approval in hand, as well as determining a price range and area in which you are looking. As a home seller you have a plan in place before the home is on the market; which includes a pricing and marketing plan, as well as having your home in its best possible condition so as to give the best impression.

Even though the process of buying or selling a home is straightforward (after all it’s not rocket science), being prepared for various stages can help you through potential issues. If you’re a first time buyer or seller, having a checklist helps you be aware of where you are in the process. Even if you’ve bought or sold a home before, you should be aware of changes to the process that have been made in the last eight years.

You should also be aware that every transaction is different; each transaction has a different set of personalities, conditions, and issues. You no doubt have heard your relatives’, friends’ or coworkers’ account of their buying or selling experience. But chances are that they may not remember the snags they endured. Reactions among buyers and sellers, as well as their real estate agents, vary depending on their personalities and life circumstances. So, your experience may be similar to others’; however, be prepared that it could also be very different.

Additionally, many never realize how many individuals are involved in getting their transaction to settlement. Besides the buyer, seller and real estate agents, there is a lender, a title company, and a home inspector, (among others); each increasing the number by a factor of their employees, and increasing the opportunity for Murphy’s Law to interrupt your smooth settlement.

Although the process of buying or selling a home appears to be task oriented, there is also an emotional component. Did you know that having a major change in living conditions and taking on a mortgage are rated in the Holmes and Rahe Stress Inventory? This acknowledges that buying and selling a home is an emotional investment that could impact your emotional wellbeing (positively and negatively). Chances are that at some point you may feel the added pressure of your sale/purchase.

Mental preparation for your home purchase or sale may include moderating expectations and anticipating how you may cope with various circumstances that may arise. Mental preparation can help maintain a feeling of control over your transaction. It can be helpful to work with an agent who can address your worries and fears about the transaction through listening and empathy. Most of all, hire an experienced real estate agent, who not only has the ability to problem solve and work through problems, but will help you organize and prepare.

by Dan Krell
Copyright © 2016

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