First-time home buyer's guide: money management.IF YOU'RE THINKING OF BUYING YOUR first home, now's the time. Housing starts are up. Interest rates are near 20-year lows. And to top it all off, bankers and insurance executives say they're working harder to do more business with minorities and in minority neighborhoods. Still, statistics show that African Americans and other minorities have a hard time landing that first home. Don't despair. If you've decided it's the time to buy, here are the basics you'll need to work around the obstacles and get the house you deserve. You'll be glad to know that housing is much more affordable today. The median price of a home is lower now than it was in 1989--and even lower than in 1979, when adjusted for inflation. As a percentage of after-tax median income, homes cost, on average, 33% less than in 1982. Interest rates are also favorable, thereby keeping your mortgage burden reasonably in check. That combination of factors has benefited African Americans. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the latest data from the U.S. Census Bureau Noun 1. Census Bureau - the bureau of the Commerce Department responsible for taking the census; provides demographic information and analyses about the population of the United States Bureau of the Census , African Americans have a home ownership rate of 42%. And data compiled by the Federal Housing Authority (FHA See Federal Housing Administration. FHA See Federal Housing Administration (FHA). ) indicate African Americans account for about 50% of new home buyers, with the largest growth among single or newly divorced black women. It's that kind of environment that got Rhonda and Brian Alexander
Brian Alexander of Brooklyn, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , looking for Looking for In the context of general equities, this describing a buy interest in which a dealer is asked to offer stock, often involving a capital commitment. Antithesis of in touch with. a place of their own immediately after getting married. But like many first-time homeowners, the couple found that shopping for the perfect nest was only the beginning of their worries. "Many times we reached a point where we thought we'd hit the home stretch, only to find out a whole new process was just beginning," says Brian. Long before you get to closing, Rhonda adds, you realize that "it's hard work, work that takes dedication and persistence, but a process that is well worth it." ASSESS YOUR DEBT Every smart first move coward homeownership begins not with a trip to the real estate agent but with a hard look at your finances. How much can you afford to pay? Have you been paying your bills on time? Are you carrying large credit card balances? Are you struggling to make car payments? Have you seen a copy of your credit report lately? And if you're married, does your partner's credit history directly affect yours? More than likely you'll have to apply for some sort of financing from a lending institution Noun 1. lending institution - a financial institution that makes loans financial institution, financial organisation, financial organization - an institution (public or private) that collects funds (from the public or other institutions) and invests them in . Banks and mortgage lenders will scrutinize every facet of your expenses to judge just how much of a mortgage you can handle. And the statistic they'll use--the infamous debt-ratio--amounts to a monthly ratio of what you owe on outstanding bills in addition to the debt you will incur through your new home, divided by your gross monthly income. According to home mortgage specialist Gary Clark Gary C. Clark (born May 1, 1962 in Radford, Virginia) is a former professional American Football wide receiver who played for the Washington Redskins (1985-1992), Phoenix Cardinals (1993-1994) and Miami Dolphins (1995) in the National Football League. , most lenders aim for a 28/36 debt ratio. Translated, that means not more than 28% of your gross monthly income should be devoted to housing costs, and that all your other monthly expenses should total no more than 36% of your monthly income. Ed Dudley Edward Bishop Dudley (February 19, 1901 – October 25, 1963) was a leading tour golfer of the late 1920s and 1930s. Dudley was born in Brunswick, Georgia. He was a 15-time winner on the PGA Tour. Jr., found out the hard way just what the debt-ratio game could do to home-buying dreams. With his sights set on a three-bedroom home in Dayton, Ohio Dayton is a city in southwestern Ohio, United States. It is the county seat and largest city of Montgomery County. As of the 2005 census estimate, the population of Dayton was 158,873. , Dudley found his ratio wrecked due to his car loan and high credit card balances. Even after paying off his car note, Dudley discovered that banks still shied away since his expenses totaled more than 36% of his monthly income. It took several weeks and some creative math on the part of his accountant, coupled with a strong recommendation from his mortgage broker, before the bank would approve his loan. "A first-time home buyer doesn't realize that it's all about the numbers," warns Dudley. STARTING THE HUNT The first thing to decide is just what kind of house you want. Whether a two-family brick home or a condominium, each dwelling presents different financing options to lenders. Next, find a real-estate agent Real-Estate Agent A person with a state/provincial license to represent a buyer or a seller in a real-estate transaction in exchange for commission. Most agents work for a real-estate broker or realtor. . Asking friends and family for references is a good start, although hiring your own broker for a flat fee or hourly rate will probably result in a better deal. Most agents listed for a particular property are out to make a sale and protect the sellers of the individual property. So setting up the right relationship with a broker will go a long way in saving you time and money. However, you can choose an agent who represents a firm you want to work with. Tell him or her what kind of home you're looking for and the kind of neighborhood you'd like to consider. That firm's broker can then consult the multiple listings service, a computer database of homes registered for sale with all agencies, for properties fitting chat description in chose areas. He or she will inform you about houses and set up appointments for you to see them. When you buy a home, your agent will get half of the commission on chat sale and the listed agency will get the other half. Still, there remains one particularly prickly issue for African Americans: getting a bank and insurance company to actually approve the neighborhood you wish to live in. Troy White, 31, single and a Howard University Howard University, at Washington, D.C.; coeducational; with federal support. It was founded in 1867 by Gen. Oliver O. Howard of the Freedmen's Bureau, to provide education for newly emancipated slaves. A normal and preparatory department was opened the same year. graduate, found out just how thorny when he found a two-family brownstone brownstone, red to brown variety of sandstone. Its unusual color is caused in some instances by the presence of red iron oxide which acts as a cement, binding the sand grains together. in the Hamilton Heights section of Harlem in New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. . White's choice didn't sit well with potential lenders or insurers. Although the Fair Housing Act makes it a crime to discriminate against mortgage applicants seeking to buy homes in mostly minority areas, the first bank he approached refused him. White felt the decision hinged on his choice of Harlem. He unearthed Unearthed is the name of a Triple J project to find and "dig up" (hence the name) hidden talent in regional Australia. Unearthed has had three incarnations - they first visited each region of Australia where Triple J had a transmitter - 41 regions in all. a black loan officer at the same bank, who helped her colleagues see the value of the property despite its "undesirable location." Even after he got the bank on board, White faced a second hurdle: trying to get insurance for his pending new home. He found it nearly impossible to get full-coverage homeowner's insurance, finding that appraisers severely undervalued Undervalued A stock or other security that is trading below its true value. Notes: The difficulty is knowing what the "true" value actually is. Analysts will usually recommend an undervalued stock with a strong buy rating. the property and wanted high premiums--again because of its location. Fortunately, White knew his rights and threatened legal action. The problem isn't isolated to New York. This past spring, one of the most reputable insurers in the country, Nationwide Insurance Co., settled charges that it discriminated against homeowners in minority neighborhoods. and promised to devote $13 million toward development in those same areas. THE DOWN PAYMENT The next step, dealing with the down payment, keeps many African Americans out of the homeownership game. Most lenders require a down payment of 10%-25% before considering your mortgage application. If you've got your eye on a place that costs from $50,000-$300,000, coming up with a down payment may seem a bit off-putting. In recent years, banks and sellers have become more aggressive in finding creative solutions to overcome the down payment hurdle. One example is the National Home Owner home owner home n → propriétaire occupant Strategy implemented by the FHA. Under one of their programs, first-time home buyers can put down as little as 3% on a house. But be forewarned: the application can seem like an obstacle course obstacle course n. 1. A training course filled with obstacles, such as ditches and walls, that must be negotiated speedily by troops undergoing training or participants in an obstacle race. 2. , and getting an approval is not always guaranteed. Still, the difference is well worth the effort. Also, the Housing and Urban Development (HUD Hud (h  d), a pre-Qur'anic prophet of Islam. Hud unsuccessfully exhorted his South Arabian people, the Ad, to worship the One God. ) branch of the
federal government has launched a program to specifically help neelyweds
buy homes. Called the "bridal registry A bridal registry is a system designed by department stores for the purpose of allowing an engaged couple to manage the purchase of gifts for their wedding. From what is available at the store, the couple creates a list of items that they would like to receive, then the list is account," it allows
couples to use any monetary wedding gifts toward the down payment on a
home. You must open a savings account Savings AccountA deposit account intended for funds that are expected to stay in for the short term. A savings account offers lower returns than the market rates. Notes: with one of their 37 participating banks, and the "weddillg offering" must be made directly to this account. This fund is not tax-exempt, and there is no timetable on how soon if should be used. (For more information, call 800-CALLFHA.) PRIVATE MORTGAGE INSURANCE If your down payment is less than 20%, your lender will get an insurance company to re-underwrite the loan. Called "private mortgage insurance" or PMI See Private Mortgage Insurance. , the cost of this insurance policy will he added to the cost of the monthly mortgage you will have to pay. And you will pay until you reach 20% equity in the home and the lender can be assured of your ability and timeliness to pay each month. These underwriters also have the final say about whether your loan gets approved. "A borrower can't do much to make their application PMI-proof. But if the credit history has not been a problem for the bank, then most likely it won't be a problem for the underwriter," explains Gordon Bussey Jr., vice president of Intercountry Mortgage in Westbury, New York Westbury is a village in Nassau County, New York in the United States. The population was 14,263 at the 2000 census. The Village of Westbury is in the Town of North Hempstead. . Remember: most banks work with at least four or five insurance companies. So if one rums down your application, most likely one of the others will be willing to work with you. Fannie Mae Fannie Mae: see Federal National Mortgage Association. is the largest source of home mortgage funds. The Fannie '97 mortgage plan helps financially responsible borrowers find a broader array of sources for their down payment, including personal savings. a personal loan, a financial gift from a family member or a grant from an employer. Under its standard underwriting, borrowers must make a minimum down payment with their own funds. Call 800-7FANNIE. GETTING FINANCING Let's face it: your mortgage is probably going to be your biggest monthly bill. Yet, in all the euphoria and frenzy involved in landing a new home, you probably don t realize how much of a load it will really be. So when it's time It's Time was a successful political campaign run by the Australian Labor Party (ALP) under Gough Whitlam at the 1972 election in Australia. Campaigning on the perceived need for change after 23 years of conservative (Liberal Party of Australia) government, Labor put forward a to find a lender, you must pay close attention to the types of loans offered and the interest rates. On closer inspection, you'll find your choice of mortgage will depend on how much risk you're willing to shoulder. Fixed-rate mortgages are the safe bet. Your monthly payments are locked into one interest rate, and determined by the interest paid on U.S. Treasury U.S. Treasury Created in 1798, the United States Department of the Treasury is the government (Cabinet) department responsible for issuing all Treasury bonds, notes and bills. Some of the government branches operating under the U.S. Treasury umbrella include the IRS, U.S. bills at the time of the loan. Usually fixed at 15-, 20- and 30-year rates, they're a good bet if you plan to remain in the same home for a long time. Another type of loan, the adjustable rate mortgage This article is about the US mortgage type. For an international perspective, see Variable rate mortgage. An adjustable rate mortgage (ARM) is a mortgage loan where the interest rate on the note is periodically adjusted based on an index. , or ARM as it's known in the business, is cheaper, but puts the risk of fluctuating interest rates in your lap. If rates rise while you have the loan, you'll pay more in interest. But it may be a good idea to opt for an ARM if you feel your earning power Earning power Earnings before interest and taxes (EBIT) divided by total assets. earning power 1. The earnings that an asset could produce under optimal conditions. For example, AT&T may currently be earning $2. will increase over time or you don't plan on spending more than a few years in that house. When considering an ARM, check to see that the interest rate is at least two points lower than a fixed-rate mortgage for a comparable time, so you don't get burned on rate changes. Some of the best loan deals going are VA loans. The Department of Veterans Affairs Veterans Affairs is a term of the business that deals with the relation between a government and its veteran communities, usually administered by the designated government agency. promises to secure up to 50% of the estimated value of your property if you were ever part of the armed forces. That's how Capt. Candice Tillman bought her place in Fayetteville, North Carolina Fayetteville is a city located in Cumberland County, North Carolina. As of the 2000 census, the city had a total population of 121,015. It is the county seat of Cumberland County GR6, and is best known as the home of Fort Bragg, a U.S. . As an active serviceman, Capt. Tillman qualified for a VA loan, and since her down payment amounted to no more than 1% of the final closing costs Closing Costs The numerous expenses (over and above the price of the property) that buyers and sellers normally incur to complete a real estate transaction. Costs incurred include loan origination fee, discount points, appraisal fee, title search, title insurance, survey, taxes, , she didn't have to break into her savings to make her purchase. Jennifer and Michael Stewart Michael Stewart may refer to:
COMING TO THE CLOSE Like it or not, you're in for additional financial outlays when it's time to "close" the contract on your home. Closing costs cover a variety of things, including property taxes, title search fees, taxes, appraisal and attorney fees, deed registration and homeowner's insurance. Usually the amount is 7%-10% of the purchase price of your house. One of the biggest up-front closing costs you'll pay will be the "points" on your mortgage. Points are the fees the lending institution charges on the money borrowed at a given interest rate. Each point is equivalent to 1% of the total amount you are borrowing. The higher the points you pay, usually the lower the interest rate on your mortgage. If you can afford it, pay higher points to reduce the interest rate, which, in turn, will reduce your monthly payment and the amount of interest you'll pay over the life of the loan. For example, to borrow $50,000 at an interest rate of 8.5% with zero or no points, you'll pay $385 a month. However, if you're willing to pay one point up front to borrow the money, your interest rate would be lowered to 8.25% and you'll pay only $376 a month. Over the life of a 30-year loan, you would save over $4,000 in interest payments. Raise that figure to two points, and the interest rate is lowered to 8%. Your monthly payment drops to $367, saving you $7,000 over the life of the mortgage. The Alexanders are now in the final stages of closing on their first home. They've spent at least a year and a half looking for the house of their dreams and then applying for a loan. "They [the bank] can be real rigid about the things you need to submit, the documentation they need, even how you submit materials, says Brian. The Alexanders estimate their closing costs will amount to 10% of the cost of the home. Despite the time, energy and cost that it can take to buy a piece of the American Dream, in the end you'll probably feel the process was worth it. As you begin your search, here are a few additional tips to keep in mind: * Feel comfortable with negotiating. Almost everything is negotiable--purchase price, financing and closing costs. Don't be intimidated. The worst that can happen is the seller or the bank will say no. * Get a lawyer. Make sure your lawyer works out a "contract of sale" that stays valid long enough for you to finance your loan. If you get rejected by any lending source, you'll want to have enough time to start the process again. Your lawyer can also keep your "deposit," usually one-half of the down payment, in an escrow account payable to the seller, until you've had the home's physical condition inspected and agree with its findings. A lawyer can also execute the title and deed searches and get the tax assessments on the property. * Have your lawyer review all papers banks or lenders ask you to sign. Let him or her keep copies of all documents you submit to potential lenders. It may also be handy to have a lawyer around when you're ready to close on your mortgage, in case you feel you are being discriminated against. * You should also have a lawyer at the dosing, when you're signing all kinds of documents you'll feel intimidated about reading. * Wait for the deal that's best for you. Don't forget, it's still a buyer's market A Buyer's Market is the second novel in Anthony Powell's twelve-novel series, A Dance to the Music of Time. Published in 1952, it continues the story of narrator Nick Jenkins with his introduction into society after boarding school and university. . Get in the driver's seat and stay there, whether you're dealing with a seller, broker, bank or an insurer. Soon you, too, will join the ranks of proud homeowners! RELATED ARTICLE: Homing in on Housing Resources Here are some organizations, books, Web sites and software that can provide you with more information: U.S. Department of Housing and Urban Development: Check their Web site at www.hud.gov, or call the following toll-free numbers: * Housing Counseling Referral Line: 800-569-4287 * Fair Housing Information Clearinghouse: 800-343-3442 * Multifamily Housing Clearinghouse: 800-685-8470 * FHA Hotline: 800-CALL-FHA U.S. General Services Administration's Consumer Information Center: For a free catalog, write to the GSA (1) (Global mobile Suppliers Association, Sawbridgeworth, U.K., www.gsacom.com) A membership organization of suppliers of GSM products and services. Its goal is to promote GSM as the worldwide mobile communications standard. See GSM Association and GSM. at: Consumer Information Catalog, Pueblo, CO 81009; www.pueblo.gsa.gov. American Homeowners Association HomeCentral: 888-470-2AHA; or www.ahahome.com Interactive Homebuying on Web: www.max sol.com/homes National Home Buying Institute: 1485 Kelley Johnson Blvd., Suite 210, Colorado Springs, CO 80920;719-599-0423 BOOKS Home Buying for Dummies, by Eric Tyson and Ray Brown, IDG IDG International Data Group IDG Integrated Drive Generator IDG Installation Design Guide IDG Internet Discussion Group IDG Inset Dielectric Guide IDG International Dangerous Goods (mail, shipping) Books Worldwide, $16.99; 800-434-3422 or 800-762-2974 How to Buy a House, Condo, or Co-op, by Michael C. Thomsett, Consumer Reports Books, $16.95; 800-500-9760 SOFTWARE Fannie Mae's Desktop Home Counselor (DHC DHC Dihydrocodeine DHC District Heating and Cooling DHC Dark Horse Comics DHC Dynein Heavy Chain DHC DeHavilland Canada (aircraft) DHC Discovery Health Channel DHC Drop Head Coupe ) Designed to help counselors provide detailed financial information, budgets and generate credit reports and affordability analyses to help home buyers determine their readiness to buy a home. |
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