• Taxes. Along with death, they’re one of the few things in life you just can’t avoid. And if you do avoid property taxes, you’re in for a rude awakening when the city decides they have a greater stake in your home than you do. Guess who wins that fight every time? Better to know what your taxes are going in and budget for them, with escrow if possible.

• Utilities. It happens every time. Partly because apartments tend to be smaller and surrounded by other units, they tend to use less electricity and gas for heating and cooling. Additionally, less water is used, because you’re not watering the lawn in most cases.

• Home Repairs. Even if you’re buying a brand new house, things can and will go wrong. Don’t skimp on the inspection. Have the best home inspector in the area check your house over thoroughly before you buy it. There’s nothing wrong with buying a home that needs a little TLC, but you don’t want any more surprises than necessary.

• Maintenance. Completely apart from repairs, there are costs associated with simply maintaining your home. Things like taking care of the yard and the outside of the home all represent new expenses for those accustomed to renting.

• Insurance. Not only does homeowner’s insurance cost more than rental insurance, it also is mandatory with most lenders. If you have a home loan, you will have your home insured. Make sure you factor in the cost when deciding which home to buy.

All of this is not to scare anyone away from buying a home. What it should do, though, is ensure that you consider all of the costs when deciding which home to buy.

Photo via zieak

What it was

One of the decisions that the government made in order to help the struggling housing market after the crash and subsequent economic disaster was to offer a tax credit to new home buyers. The credit was available to home buyers with a maximum income level that varied a little bit during the term of the program.

The program was designed to help folks who hadn’t owned a home in at least 3 years to buy one. Buyers could get a tax credit of 10 percent of the home’s purchase price, up to a maximum of $8,000. That means if you bought a home for $65,000, you could get $6,500 in tax credits. A home that had a price of $150,000 would give you $8,000 in tax credits.

The program added a tax credit for existing homeowners for a while, too. That credit was smaller, with a maximum of $6,500. Both programs ended at the end of April, 2010.

Did it work?

New home sales in March 2010 rose 27 percent, which was the highest level in nearly five decades. The annual rate of home sales was beyond even the most optimistic predictions. Home sales jumped in every region in the country.

Much of that has had to do with the tax credit. Economists believe the credit did its job, and the program was allowed to expire rather than being renewed.

You might still qualify

There are some exceptions to the expiration. If you’re serving in the Armed Forces or working for the U.S. Government outside of the U.S., you can claim the credit into 2011. For all groups, however, you have to meet the qualifications and enter into a contract by April 30, 2011. You need to close by June 30, 2011.

Experts don’t believe the program will be re-introduced anytime soon. Hopefully, this is good news and shows that perhaps the housing market is well on its way to making a full and complete recovery.

Photo via zaphodsotherhead

Yes, I’m talking about buying your first home, and the first home loan that goes along with it.

Fortunately, there are some things you can do to make your first home buying experience a little bit easier. In fact, if you follow these five basic steps, you can take most of the pain out of the experience and make it an entirely positive thing.

1. Hire an agent. Hiring a buyer’s agent is going to help you in a number of ways. First of all, it’s going to save you a ton of time. On top of that, you’re going to benefit from the agent’s training and experience. Yes, you can go to open houses and look through listings online, but having an agent can help you in other ways. They can help you get through the necessary MLS parameters, they may be aware of new listings not yet on the market, and an experienced agent will help you know whether a home is overpriced.
2. Find the right home. Yes, that’s easier said than done. Chances are you’re going to look at many homes. Try to keep it down to less than half a dozen, however, just to keep your head from spinning. Concentrate on choosing a neighborhood first, because once you do you’ll only need to look at a few homes to find the right one.
3. Get your home loan. Not everyone needs to get a home loan in advance, but it can help. Some sellers won’t even consider your offer if they don’t know you’ve already been preapproved.
4. Negotiate. Now you’re to the place where you’re ready to make an offer. Your agent can help you by providing comparable sales in the area, but keep in mind that a seller can charge what they want. Know what you can pay, and stick to your guns.
5. Do the inspection. Some states require you to do this before you make a purchase offer, and in others your home inspection becomes a contract contingency. This lets you cancel the transaction if, for example, you discover the home has a faulty foundation.

Photo via Mister.Tee

These loans provide a number of benefits to buyers. First of all, they usually allow you to buy a home with a very low down payment, or in some cases, no down payment. These programs may subsidize some or all of your interest costs. There may be grants to help buy your home. These programs usually limit the fees that lenders can charge you. They also may be able to defer payments for you.

Still, a first time buyer home loan isn’t always the right choice, even if you’re thinking about buying a home for the first time. There are some specific circumstances in which you might think twice about taking out a first time buyer home loan:

• First time buyer home loan programs often limit the price of the home you can buy. This means you may be faced with buying a home with a lower value than the home that you’d prefer to have.
• In some cases, you can lose benefits of the program if you decide to move out of and sell your home within a certain amount of time. Typically, for many programs, you need to live in the home five full years before you’re able to move without penalty.
• You might have a limit to the type of loans you can take out. Some programs will only let you have a 30-year fixed rate mortgage, for example.
• Some programs require you to share the appreciation on your home. That is, when your home increases in value, the program gets a cut.

If you have excellent credit, you’re probably better off with a traditional mortgage rather than a subsidized first time buyer home loan. If your credit score is below 680, the benefits of these programs increase, as they give you more options.

Photo via Jacquie

Because of this, lots of folks choose to build new homes. They assume that new construction will be sturdier and more reliable than an existing home, and in general they are right.

However, new homes can have problems, too. Here are some of the nightmare scenarios you can find when building a new home:

• The home is built over an old tree stump. If your home doesn’t have a basement, you can’t be certain what’s located just a few feet below ground. That tree stump can lead to chronic termite infestations, and that can be a horribly difficult problem to fix.
• The back yard has a huge, buried boulder in the back yard that you only discover when you try to put in a pool.
• The driveway pitch is so steep that your car’s bumper scrapes the ground every time you enter the driveway and whenever you enter the garage. You wind up having to buy a truck or 4×4 just to avoid the scraping.
• You move into the new home and have your washer and dryer delivered, only to discover there’s no gas hookup for the dryer – only electric.

In some cases, the builder may be able to work with you to address some of these issues, but in other cases you’re looking at huge out of pocket expenses.

There are some minor annoyances, too, that you can find with any new home, including things like:

• Your furniture or appliances don’t fit through the doors to the rooms they need to be in.
• Electrical outlets or light switches may be at inconvenient locations.
• The layout may not be intuitive. For example, the dining room may have no direct access to the kitchen, or the kitchen may be at the far end of the house from the garage.
• The clothes dryer door may interfere with a path in or out of the laundry room or another room.
• The dishwasher door may prevent more than one person from being in the sink area at a time.

Before you sign the dotted line on your new home loan, make sure you know what you’re getting into.

Photo via camshafter

Up to this point, the tax credit has cost the taxpayers around $10 billion. Some studies suggest that as few as 20 percent of the people claiming the credit were truly new home buyers. The program was expanded to allow buyers to claim the credit for as long as five years, and it also raised the income threshold set for eligibility.

Still, the home buyer tax credit is the smallest portion of the “cash for clunker homes” mess. Both Fannie Mae and Freddie Mac, the two Government Sponsored Enterprises were ones that promoted subprime home loans as well as the securitization of mortgages, part of what led to the housing mess. Essentially, these two GSEs took bad mortgages and turned them into bad securities.

As of now, Fannie and Freddie are responsible for underwriting $5.4 trillion in home loans. Back in October, the Treasury Secretary Tim Geithner promoted the extension of today’s loan limits to help make more home loans available for working families, and also to help with the recovery of the housing market.

Yet, this hasn’t been a success story by any means. Fannie Mae lost $102 billion over the past two years. Freddie Mac, while they lost less than Fannie Mae in the third quarter of 2009, is down $121 billion in the past 14 months. Freddie Mac has been provided a total of $60 billion in aid from the taxpayers over the past two years.

Still, the FHA is pushing ahead like a bull in a china shop. They’ve issued over $360 million in home loans in 2009, which is around twice the amount they issued in 2008 and as much as four times the amount they loaned in 2007. The FHA only requires a down payment of 3.5 percent, and the limit for an FHA loan is, temporarily, $729,750.

To further illustrate this, look at the FHA’s share of new home loans. In 2006, just 2.7 percent of new home loans were FHA loans. Today, 23 percent of new home loans are FHA loans. In that time, the capital reserves of the FHA dropped to around half a percent, which is well below the two percent mandated by congress.

Time will tell what all of this messing with the markets will do. Fannie Mae and Freddie Mac are again in a risky position, and it would seem that Washington politicians are bound and determined to repeat their mistakes.

Photo via Bob Jagendorf

It’s important to understand a little bit about the program, first. The tax credit program applies only to first-time home buyers, which the government defines as buyers that have not owned a home for three years prior to purchasing a new home. The credit also has income limitations. An individual who makes less than $75,000 or a married couple who makes less than $150,000 qualify for the full credit, while those that make more may qualify for a partial credit.

The initial results seem to be promising. In September, sales of previously owned homes in the U.S. hit the highest level they’ve seen in two years. This suggests that the tax program has, at least in part, been a success. It also suggests that perhaps the housing market, as well as the overall economy, are on the mend.

According to the National Association of Realtors, home sales rose a total of 9.4 percent in September. This was an annual rate of 5.57 million units. In comparison, August saw an annual rate of 5.09 million units. Even the best projections for September suggested a rate of 5.35 million units for September. In addition, the total inventory of homes declined, which is another good sign. 472,000 homes were sold in September, but only 178,000 new homes were added to the market. These are some of the best numbers that the real estate industry has seen in quite a long time.

September wasn’t the only up month, however. Home sales have actually been rising for the past seven months, which reflects an improving trend in the overall housing market. Again, much of the trend is likely due to the new home buyer tax credit, but economists hope that it is also a sign of good things to come.

There is talk in congress of trying to extend the new home buyer tax credit program. Proponents argue that allowing the program to expire would have a dragging effect on home sales, and they may be correct. Other signs of a robust economy, such as improved employment numbers, are needed for consumer confidence to continue to grow, and for home sales to continue to rise on their own. Whether or not those numbers continue to improve or not remains to be seen.

Few things are as exciting as buying your first home. Whether you’re just getting started in your career and family or whether you’re making a lifestyle transition, taking the plunge into a new home is one of the smartest things you can do, too. The time is especially good right now for first time home buyers to take advantage of what’s going on in the home mortgage market, too.

Before you get too far, there are some important trends you need to be aware of and take into account when buying your home:

1. You’re probably going to need a sizable down payment. The days when you could get a new home with a three percent down payment are, for the most part, a thing of the past. Today, you can expect to pay as much as ten percent down on your home.
2. Lenders are being more picky than ever. The so-called “Credit Crunch” is a stark reality, and it’s not over yet. Lenders are likely to be much more picky about things like proof of income, employment history and, of course, the all-important credit report. Make sure you’ve got all of your ducks in a row, from fixing errors on your credit report to a verifiable income.
3. Home prices are, for the most part, still continuing to slide. The national median home price has fallen more than a quarter since 2006. No one can be sure when they’ll stop, although some experts suggest that the brakes are already on. This matters to you because, if prices continue to drop, you can find yourself owing more on your house than what it’s worth on the market. Make sure the home you choose is one you’re in for the long haul, and don’t worry: home prices will, eventually, come back up.
4. In some states, such as Arizona, California, Florida and Nevada, there are a lot of foreclosed homes on the market. At the end of last year, nearly half of all home sales were “distressed” – either foreclosures or short sales. This benefits you on two levels. First, you can consider buying one of these homes, often at a much lower price than a home that’s not distressed. Second, this phenomenon puts pressure on the rest of the market, forcing traditional sellers to cut prices in order to stay ahead. In many places, it’s a buyer’s market.
5. Don’t forget that your local housing market is, above all else, local. If you want the best house for the best price, you need to study the local market. Check out the real estate listings, but do some other research, too. Find out about foreclosed and bank-owned homes. Even if you’re not interested in these kinds of properties, you can use that knowledge as leverage during your mortgage negotiations.

No one knows for certain what tomorrow will bring. There are signs that housing prices may soon rise, although low interest rates are likely to stick around for a while. We may very well be in a sweet spot of sorts, an ideal time to buy that first home you’ve been dreaming of.