3-2-1- LIFTOFF! Prevent Failure to Launch: Help Your Kid Buy A House This Year
I think this is a good post just for the fact that it simple and easy to understand... this is a great time to buy and that your parents can help you buy and it's not that difficult as many will describe. But I needed to clarify something that is all to often stated incorrectly and was mentioned in the blog below.
"FHA closing costs are "too high". Yep, FHA will have slightly higher closing costs than conventional. Seller may not pay closing costs."
FHA loans don't have higher closing costs. Maybe some lenders charge more, because they can. But in my 16 years, FHA loans have always been the same or cheaper than conventional loans. I spoke to 5 other loan officers across the U.S. that agreed with me, those that have been doing FHA loans for over 8 + years. The costs are no different than a conventional loan. I can actually in most cases, be cheaper on a FHA loan than a conventional loan. I am a 1/2 pt better on FHA loan at 5.0%. I am .269 pts better on a 4.75% rate. And I am about .26 pts worse on a FHA loan compared to a conventional loan. But then again, you need to compare fico scores and down payments. Because if you put less than 20% down and your credit score is under a 720, it costs you a 1/2 point more. So then hands down, FHA loans are cheaper. And when I say 20%, I mean 19.99% down. If I put 25% down, with a credit score of 719, it will actually cost you .75 pts more. These are things that many loan officers don't compare or explain, because they just assume. Don't believe me, please read :
The other issue.... sellers are allowed to contribute up to 6% of closing costs to the borrower. In one case, she mentions this and in another case, she says it's not allowed. The basics of the home buying process can be confusing enough, but to have two conflicting pieces of information?
One last thing... the tax credit is good only through November 31, 2009, not through the end of the year. It might not sound as critical, but if you are under the assumption that the tax credit is good through the end of the year and you settle on your loan December 1st, 2009, you will get no credit. There are no exceptions, not unless Congress extends this later on. For more information on the 2009 first time homebuyers tax credit, please read : First time homebuyers tax credit of $8,000
I just had to point these 3 issues out because just in the last 10 days, I have heard that FHA loans are more expensive than conventional loans... and not just twice, but about 5 times. We need to keep the correct information out there and not just average information. Comparing FHA loans to Conventional loans with 20% down - A Reality Check
For more accurate information, please don't hesitate to contact me at : jbelonger@ihmci.com thanks, Jeff
It wasn't THAT long ago that we Baby Boomers worried a lot about our kids.
You know, those irrepressible Generation Y kids who were on the Internet at age 4 and who grew up clicking (my son says I grew up turning dials and that is why his generation is superior different).
Sitting on our own fat bubble- enhanced, low taxed properties, we watched prices spiral out of control here in the San Francisco Bay Area. We believed our children would either:
- Never be able to afford a house
- Move away forever
- Move back in with us (eek!)
But post meltdown, all of that has changed. And in the wake of economic disaster lies a once in a lifetime opportunity to get junior into his very own house or condo.
This is the year to help your kid become a first time buyer. You snooze, you lose.
No, I cannot promise son will become a handyman or daughter will turn into Martha Stewart. But I can promise you that everyone in the family will look back someday (sooner than you think) and thank their lucky stars you took advantage of a 24 karat golden real estate opportunity to give your child financial stablity.
Why this year? Here are 3 reasons that point directly to the stars being lined up perfectly:
- Cheap properties (prices being driven down by foreclosures)
- Low fixed rates on old fashioned 30 year mortgages
- FHA financing finally has limits high enough to buy in California
As if that isn't ENOUGH, here is your amazing limited time BONUS OFFER: First Time Homebuyer Tax Credit of $8000 is good through the end of the year.
The strategy:
- GIFT your child the down minimum payment (3.5% of selling price)
- ASK the seller to pay the closing costs in your offer, so your kid needs NO cash at all
- SNAG a cheap property in the best location your kid can afford
Be prepared for this:
- MULTIPLE OFFERS on lender foreclosed properties for sale
- SELLERS insisting on an approval with a LENDER (not just a letter from the mortgage person)
- A LONGER time line than you are expecting
10 things not to worry about:
- Rates will go lower. FHA loans have the ability to be easily re-written if rates drop (streamline refinance)
- Real estate will be cheaper. So what? Think long term.
- Your kid isn't "ready". Most first time buyers do not have the perspective to understand the benefit of the tax credit, or the silver lining of economic downturns. Come to think of it, you probably weren't "ready" when he was born.
- Going on the loan with your kid. If your kid has no job now, or just can't afford to buy, you can co-sign.
- Finding the "perfect" house/condo. It is a starter house, for crying out loud. Do not expect lender foreclosures to be pretty
- FHA closing costs are "too high". Yep, FHA will have slightly higher closing costs than conventional. Seller may not pay closing costs. You can gift your kid closing costs, too.
- What if my kid loses his job? "What if's" are the biggest reason for missed opportunities!
- The real estate market is just too confusing! That is why you should find a great real estate agent
- Getting a loan is a big hassle! Get preapproved first with a great mortgage person
- Where will I get the cash to help my kid? How about an equity line or retirement account? Maybe Grandma has the money?
Get your kid set and maybe you could move in with him someday. (double eek!)
Maybe not.
Written by Janet Guilbault, Mortgage Banker/Broker Based Out of the San Francisco Bay Area
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