Dear Annie: My wife and I have had stable jobs for more than five years. We have managed to survive round after round of layoffs but you never know what’s around the corner …
We’d like to know how to get into a home that we can afford, even if financial hardship should hit. We do not want to buy a home we cannot afford and then have to lose it like so many other homeowners in the last three years. What is the best deal in real estate for us?
– Jessie and Isabel
Dear Jessie & Isabel: Your concerns about the economy are very valid. I would be nervous, too, facing regular rounds of layoffs.
The fact is you’re both working now and affordable home buying is within your reach. Let’s set you up with a local loan officer to look at your credit, provide you with a pre-approved loan amount and estimate a monthly payment that fits your budget.
Q&A for a buyer’s market What is the best deal for me? Your loan officer will let us know what type of loan you qualify for: FHA, VA, conventional, USDA, etc. Very often buyers will say to a real estate agent, “I don’t mind buying a fixer-upper.” If that’s the case, you will need to discuss it with your loan officer, who will advise you how much to put down on a property that is lacking a kitchen, has a leaky roof, no gas furnace, is uninsurable due to flood damage, etc.
What kind of buyer am I? There are basically five groups of buyers.
Investors: Most investors are cash buyers or conventional loan buyers who usually put between 20 and 50 percent down. Investors want the monthly payment to be low so the rent will cover the whole mortgage. Most conventional buyers have funds set aside to perform major rehabilitation on homes that are in poor condition.
First-time buyers: The majority of buyers today fall into this category. First-time buyers are usually pre-approved for an FHA loan that requires a 3.5 percent down payment. U.S. Department of Agriculture (USDA) loans are financed 100 to 103 percent, are for homes in specific areas and are backed by government funding. This funding does not allow an investor to use their money to rehab fixer uppers, flip properties or profit off taxpayer dollars. If the home does not pass appraisal and physical inspections/pest inspections, the loan officer will not be able to finance it. Fortunately, in a buyer’s market, the buyer doesn’t have to settle for a fixer upper. There are many homes in good condition from which to choose.
Move-up buyers: During the real estate peak in Reno/Sparks, most buyers were move-up buyers. Folks from out of town were selling their previous homes for a healthy profit and moving here. They had sizable down payments and generally bought expensive, newly constructed homes. Most move-up buyers qualify for a conventional loan. They also tend to want a different style home than their previous ones. Overall, they desire a home in great condition that has more amenities to offer, preferably farther away from town.
Last-time buyers: These are your empty nesters with no children. They are retired and want to be closer to family, friends and favorite activities. They have sold their previous homes for a healthy profit, cashed out their investments and therefore pay in cash to avoid a monthly payment. Some prefer homes on a larger lot either to park their RV or raise animals. They prefer homes that may require a little cosmetic work but are essentially in move-in condition.
Vacation home buyers: This category is a dying breed in our struggling economy. In the recent past, vacation home buyers were drawn to the Tahoe area, plunking down hundreds of thousands dollars to purchase homes near lakes and ski resorts. Some rented out their homes during the ski seasons to offset the costs. These buyers are usually conventional loan or cash buyers. Most vacation homes are in good condition and furnished to make the sale more attractive.
So, what is the best deal for you? It’s one that you can afford, a home that will fit into your lifestyle and one that you can live in comfortably, immediately.
Annie Christian is a real estate broker and owner of The Annie Christian Real Estate Group. She helps clients with everything from buying and selling to foreclosure and short sale. To submit a question to her, call 351-5117. Her website is www.anniechristian.com.