Buying Your First Home

***Great article for those first time homebuyers...!***

Finding the right first home starts with a price range and a short list of desirable neighborhoods. But there are many other factors you'll need to consider before investing in what may be your biggest asset.

Buying Your First Home

Home ownership is the cornerstone of the American Dream. But before you start looking, there are a number of things you need to consider. First, you should determine what your needs are and whether owning your own home will meet those needs. Do you picture yourself mowing the lawn on Saturday, or leaving your urban condo for the beach? The best advice is to look at buying a home as a lifestyle investment, and only secondly as a financial investment.
Even if housing prices don't continue to increase at the torrid pace seen in recent years in many areas, buying a home can be a good financial investment. Making mortgage payments forces you to save, and after 15 to 30 years you will own a substantial asset that can be converted into cash to help fund retirement or a child's education. There are also tax benefits.
Like many other investments, however, real estate prices can fluctuate considerably. If you aren't ready to settle down in one spot for a few years, you probably should defer buying a home until you are. If you are ready to take the plunge, you'll need to determine how much you can spend and where you want to live.

How Much Mortgage Can You Afford?

Many mortgages today are being resold in the secondary markets. The Federal National Mortgage Association (Fannie Mae) is a government-sponsored organization that purchases mortgages from lenders and sells them to investors. Mortgages that conform to Fannie Mae's standards may carry lower interest rates or smaller down payments. To qualify, the mortgage borrower needs to meet two ratio requirements that are industry standards.
The housing expense ratio compares basic monthly housing costs to the buyer's gross (before taxes and other deductions) monthly income. Basic costs include monthly mortgage, insurance, and property taxes. Income includes any steady cash flow, including salary, self-employment income, pensions, child support, or alimony payments. For a conventional loan, your monthly housing cost should not exceed 28% of your monthly gross income.
The total obligations to income ratio is the percentage of all income required to service your total monthly payments. Monthly payments on student loans, installment loans, and credit card balances older than 10 months are added to basic housing costs and then divided by gross income. Your total monthly debt payments, including basic housing costs, should not exceed 36%.
Many home buyers choose to arrange financing before shopping for a home and most lenders will "prequalify" you for a certain amount. Prequalification helps you focus on homes you can afford. It also makes you a more attractive buyer and can help you negotiate a lower purchase price. Nothing is more disheartening for buyers or sellers than a deal that falls through due to a lack of financing.
In addition to qualifying for a mortgage, you will probably need a down payment. The 28% to 36% debt ratios assume a 10% down payment. In practice, down payment requirements vary from more than 20% to as low as 0% for some Veterans Administration (VA) loans. Down payments greater than 20% generally buy a better rate. Lowering the down payment increases leverage (the opportunity to make a profit using borrowed money) but also increases monthly payments.
How Much Home Can You Afford?

Bob and Janet's combined income is $50,000 a year, or $4,166 a month. Their housing expense ratio of 28% yields a monthly maximum of $1,166 for mortgage, insurance, and taxes ($4,166 x 0.28 = $1,166).

Their total debt ceiling of 36% is $1,583 (4,166 x 0.36 = $1,500). Their monthly debt payments include a $200 car payment, credit card payments of $100, and student loan payments of $200. Subtracting this total of $500 from the $1,500 permitted leaves $1,000 in monthly housing payments.

Costs of Buying a Home

Many home buyers are surprised (shocked might be a better word) to find that a down payment is not the only cash requirement. A home inspection can cost $200 or more. Closing costs may include loan origination fees, up-front "points" (prepaid interest), application fees, appraisal fee, survey, title search and title insurance, first month's homeowners insurance, recording fees and attorney's fees. In many locales, transfer taxes are assessed. Finally, adjustments for heating oil or property taxes already paid by the sellers will be included in your final costs. All this will probably add up to be between 3% and 8% of your purchase price.

Ongoing Costs

In addition to mortgage payments, there are other costs associated with home ownership. Utilities, heat, property taxes, repairs, insurance, services such as trash or snow removal, landscaping, assessments, and replacement of appliances are the major costs incurred. Make sure you understand how much you are willing and able to spend on such items.
Condominiums may not have the same costs as a house, but they do have association fees. Older homes are often less expensive to buy, but repairs may be greater than those in a newer home. When looking for a home, be sure to check the actual expenses of the previous owners, or expenses for a comparable home in the neighborhood.

Choosing a Neighborhood

Before you start looking at homes, look at neighborhoods. Schools and other services play a large part in making a neighborhood attractive. Even if you don't have children, your future buyer may. Crime rates, taxes, transportation, and town services are other things to look at. Finally, learn the local zoning laws. A new pizza shop next door might alter your property's future value. On the other hand, you may want to run a business out of your home.
Look for a neighborhood where prices are increasing. As the prices of the better homes increase, values of the lesser homes may rise as well. If you find a less expensive home in a good neighborhood, make sure you factor in the cost of repairs or upgrades that such a house may need.

Finding a Broker

If you are a first-time home buyer, you will probably want to work with a broker. Brokers know the market and can be a valuable source of information concerning the home buying process. Ask lots of questions, but remember that most brokers are working for the seller, and in the end, their primary obligation is to the seller and not to you. An alternative is a so-called buyer's broker. This individual does work for you, and therefore is paid by you. Seller's brokers are paid by the seller.
Make sure that the broker has access to the Multiple Listing Service (MLS). This service lists all the properties for sale by most major brokers across the country. Brokerage commissions average 5% to 7% and are split between the listing broker and the broker that eventually sells the home. Don't be surprised if your broker is eager to sell you their own listing since they would then earn the entire commission.

Obama, Republicans reach deal to extend expiring tax cuts, renew unemployment benefits

***Make sure to check out the new decisions Obama is making with regard to taxes and unemployment benefits! See below.... ***

 

Obama, GOP reach deal to extend tax cuts

Obama, Republicans reach deal to extend expiring tax cuts, renew unemployment benefits

WASHINGTON (AP) -- Brushing past Democratic opposition, President Barack Obama announced agreement with Republicans Monday night on a plan to extend expiring income tax cuts for all Americans, renew jobless benefits for the long-term unemployed and grant a one-year reduction in Social Security taxes.
The emerging agreement also includes tax breaks for businesses that the president said would contribute to the economy's recovery from the worst recession in eight decades.

Obama's announcement marked a dramatic reversal of his long-held insistence, originally laid out in his 2008 campaign, that tax cuts should only be extended at incomes up to $200,000 for individuals and $250,000 for couples. He explained his about-face by saying that he still opposed the move and noted the agreement called for a temporary, two-year extension of cuts at all income levels, not the permanent renewal that Republicans have long sought.
At the same time, it signaled the arrival of a new era of divided government following midterm elections in which Republicans won control of the House and strengthened their hand in the Senate.
"We cannot allow this moment to pass," Obama said.
Officials said that under the plan, unemployment benefits would remain in effect through the end of next year for workers who have been laid off for more than 26 weeks and less than 99 weeks. Without an extension, two million individuals would have lost their benefits over the holidays, the White House said, and seven million would have done so by the end of next year.
The Social Security tax cut would apply to workers, not employers, and would drop from 6.2 percent of pay to 4.2 percent for one year. The White House said the result would be to fatten take-home pay by $120 billion over the course of the year.
In addition, administration officials emphasized that the agreement would extend a variety of other tax breaks for lower and middle-income families, including the Earned Income Tax Credit and the child tax credit.
The estate tax provision under discussion would mean the first $5 million would pass tax-free to heirs. Anything over that would be taxed at a rate of 35 percent. Democrats favored a $3.5 million threshold, with a 45 percent tax on anything higher.
In a sign of Democratic discontent, Senate Majority Leader Harry Reid, D-Nev., reacted curtly to the president's announcement.
"Now that the president has outlined his proposal, Senator Reid plans on discussing it with his caucus tomorrow," his spokesman, Jim Manley, said in a written statement.
Top Republicans were far more receptive.
"I appreciate the determined efforts of the president and vice president in working with Republicans on a bipartisan plan to prevent a tax hike on any American and in creating incentives for economic growth," said Sen. Mitch McConnell of Kentucky, the GOP leader. In a jab at Democratic lawmakers, he added, "I am optimistic that Democrats in Congress will show the same openness to preventing tax hikes the administration has already shown."
Democrats also objected to an extension of the estate tax that tilted toward the Republican position.
For months, Democrats have repeatedly raised objections to including the upper-income in any plan to extend tax cuts enacted in 2001 and 2003 when George W. Bush was president. The Democratic-controlled House recently passed legislation to let the cuts lapse on incomes over $200,000 for individuals and $250,000 for couples. On Saturday, Republicans blocked an attempt by Senate Democrats to do the same.
Obama said he personally opposed elements of the deal, such as an extension of expiring income tax cuts at upper income levels and the more generous deal on estates. But he said he decided that an agreement with Republicans was more important than a stalemate that would have resulted in higher income taxes at all levels on Jan. 1.
"Make no mistake, allowing taxes to go up on all Americans would have raised taxes by $3,000 for a typical American family and that could cost our economy well over a million jobs," he said at the White House.
Obama said the continued political stalemate over taxes amounted to a "chilling prospect for the American people whose taxes are currently scheduled to go up on Jan. 1."
In his announcement, Obama said he had agreed on a bipartisan framework, and said he wanted Congress to approve it before lawmakers adjourn for the year later this month. In a telling sign that the White House recognizes the extent of Democratic opposition, officials said they would prefer the Senate vote first.
Republicans won control of the House last month, and strengthened their hand in the Senate. Even though the newly elected lawmakers don't take their seats until January, Obama has already treated their leaders with far more deference than he has so far in his term. Similarly, McConnell and Rep. John Boehner of Ohio, in line to become House speaker, have seemed willing to strive for compromise with the White House, rather than merely oppose virtually all of the president's initiatives.
Momentum for a year-end deal picked up after Obama met at the White House last week with Republican leaders for the first time since his party's dispiriting election losses, and accelerated again when the government reported last week that joblessness had risen in November, to 9.8 percent.
The flurry of negotiations is taking place with lawmakers eager to wrap up their work for the year and adjourn for the holidays.
Obama, Reid and McConnell have all said in recent days they believe a deal on tax cuts and unemployment benefits is possible by midweek. If so, that would leave time for the Senate to debate and vote on a new arms control treaty with Russia, which Obama has made a top year-end priority.
Senate Republicans have seemed more willing to hold a ratification debate in recent days as the negotiations over taxes intensified, suggesting at least an implicit link between the two issues in the talks.

Real Estate Outlook - December 2010

*** Came across this great article relating to job growth and its effect on the real estate market. In the spirit of staying informed, thought I'd share the news. Enjoy, readers! .....

 

Real Estate Outlook: Bernanke Discusses Job Growth

byCarla Hill - Sun, Dec 5, 2010

Provided by

Is the slow pace of the economy limiting job growth? That's the sentiment from Federal Reserve Chairman, Ben Bernanke. Last Tuesday Bernanke had a chance to discuss issues other than the recent Bond purchase, and during this time he brought up concerns over job growth. Bernanke noted, "At the pace of growth that we're seeing now, we're not growing fast enough to materially reduce the unemployment rate." He says "the economy needs to grow at an annualized rate of 2 to 2.5 percent just to accommodate new workers coming into the labor force."
And while the recession officially ended over a year ago, unemployment has remained nearly constant at 9.6 percent from June of 2009.
According to The Conference Board Consumer Research Center, however, consumers are increasingly upbeat about future job prospects, with those polled expecting more jobs, income increases, and fewer job declines.
The Conference Board Consumer Confidence Index® has improved for 2 straight months now. This index is based on a monthly representative sample of 5,000 U.S. households. Lynn Franco, Director of The Conference Board Consumer Research Center reports, "Consumer confidence is now at its highest level in five months, a welcome sign as we enter the holiday season. Consumers' assessment of the current state of the economy and job market, while only slightly better than last month, suggests the economy is still expanding, albeit slowly. Expectations, the main driver of this month's increase in confidence, are now at the highest level since May. Hopefully, the improvement in consumers' mood will continue in the months ahead."
Commercial real estate markets are reportedly stabilizing, as well. Lawrence Yun, the chief economist for the National Association of REALTORS® reports that the slowly improving economy has led to a rise in commercial leasing demand. He says this "means overall vacancy rates have already peaked or will soon top out."
Yun anticipates a rise in household formation from an improving economy, which will increase demand for housing, both ownership and rental. "Multifamily housing is the one commercial sector that has held on relatively well in the past year, and can expect the best performance in 2011," he added.
"Apartment rents could rise by 1 to 2 percent in 2011, after having fallen in 2009 and no growth in 2010," Yun said. "This rent rise therefore could start to force up broader consumer prices as well."