Handy First Time Home Buyers Tips
by Ania in Illinois, Jay in Kansas, Trey in Nebraska, Kaleigh in Arizona
Ask Kate for handy first time home buyer's tips: Ania asks, Should I get preapproval for a mortgage before I start looking for FHA or Fannie Mae HomePath houses? Jay asks, Can I purchase a fixer upper home as a single parent on a student's limited income? Trey wonders, How are real estate property taxes calculated in residential construction loans?
Ask Kate continues...
And Kaleigh asks, Can my husband get approved for the FHA Loan if I have a federal tax lien on an IRS payment plan?
Question 1: Buying FHA and Fannie Mae HomePath Houses By Ania from Chicago, IL
Kate, First, should I get pre-approved before I even start looking for FHA or HomePath property?
Closing costs on both FHA and HomePath, how can I calculate my closing costs, I want to have enough money for downpayment and closing costs so I have no surprises at the end.
Thank You So Much for your Help
Ask Kate answers: Buying FHA and Fannie Mae HomePath Houses
Home buyers can find amazing deals with a HUD foreclosure home or Fannie Mae HomePath property!
What is a HUD home? A residential property that was financed with the FHA-insured loan
and has gone through the foreclosure process. You can buy a US Department of Housing and Urban Development HUD home with or without FHA financing.
What is a HomePath home? When Fannie Mae forecloses on certain homes that are financed with one of their mortgages, they are offered for sale under the HomePath program.
You can buy one of these properties with or without using the special HomePath financing.
If you are interested in financing with the FHA-insured mortgage or a HomePath loan, how do you decide which mortgage program is best for you? Mortgage pre-approval!
Yes, preapproval for a mortgage
, regardless of the program, is not optional! Or it shouldn't be!
Besides shaking the skeletons out of the closet (which will eliminate unpleasant surprises), the dress rehearsal can answer many questions and give you confidence as you shop for homes.
Go here for more details: Fannie Mae HomePath or FHA Financing, Which is Best
Question 2: Fixer Upper Houses for First Time Home Buyers By Jay from Kansas
Kate, Can I purchase a fixer upper as a single parent of one and student on limited income?
The rental that I currently live in, the landlord wants to sell or rent it out to someone else. I've been in school for 2 semesters and unable to work, due to the responsibilities and needs of my child and my full time school schedule.
I've looked around for other rentals, however, nothing is within my price range. When I say price I mean the allotted income I have. From unemployment (which is almost up) and student loans.
So, I've looked at the cheapest houses that need fixing up and I am willing to take that on. Luckily, for me I know plumbers, electricians and HVAC repair people whom can help with things of the like. I just was not sure if I could do that only on limited income.
This would be my first house and I just want to be able to be comfortable in my OWN home.
Ask Kate answers: Fixer Upper Houses for First Time Home Buyer
If you take the traditional route to finance your first home, verifying qualifying income will be necessary.
For example, many fixer upper houses are financed with the FHA Rehab Loan
. But you would need sufficient income to support the payment.
However I have another idea, buying a home on contract, especially a fixer upper that can't get institutional financing. This means you would shop for willing sellers instead of lenders. Not all sellers will be interested. But you won't know until you ask.
Take a look at this letter from T. Ford at Seller Financed vs Stated Income Mortgages
T. actually had income but it couldn't be verified. So while the stated income information won't apply to you, you will find pointers for buying a house on contract and going around the traditional mortgage system.
On a side-note, I think you'll like this. Look at this little known fact about Fixer Upper Houses
Question 3: Buying a newly constructed home and real estate property taxes By Trey from Omaha, Nebraska
Hello - I'm considering purchasing a newly constructed property. I was wondering since it is new, the county does not have the annual taxes for the property with the dwelling.
So how will the underwriter determine if I qualify for the property? I was wondering if they use a percentage of the purchase price or do they use the current tax amount from the assessor?
Ask Kate answers: Buying a newly constructed home and real estate property taxes
Mortgage underwriters estimate real estate property taxes of new construction to qualify borrowers if taxes do not yet appear on preliminary title reports.
Many times, a county does not assess the property until after construction is finalized. This can take up to a year.
Some lenders will use as little as 1.25% to estimate taxes. So if your purchase price is $100,000, $104 would be your estimated monthly taxes until the property is assessed.
But what happens if $104 a month adds up to less than the next tax bill? Ouch. That's what happens.
Either homeowners come up with cash or spread out the deficit over the next year in their payment. Monthly payments will also be increased to reflect the ongoing taxes.
No matter how you cut the cake, it is painful for homeowners of new construction if their property taxes are underestimated.
Prepare by finding out the tax assessments on nearby new construction. If it looks like your lender underestimated your property taxes, be proactive by setting aside the difference in your savings account. When the tax bill comes, you will be ready!
But note! Practices for estimating property taxes on new construction can vary state to state and even between counties. Consult the lender for your region.
Go here for useful questions and answers on financing your new home: Residential Construction Loans Explained
Question 4: Federal Tax Lien and IRS Payment Plan By Kaleigh from Arizona
Hello Kate, Can my husband get approved for an FHA Mortgage Loan if I have a federal tax lien?
My husband and I have been preparing ourselves to buy a home in the near future; however, I have a federal tax lien on my credit.
Although I am working out payment arrangements with the IRS on my balance due, I have come to terms that I may not be able to be on the loan due to my lien, unless paid in full prior to the loan origination.
I'm worried my tax lien will interfere with his ability to obtain a mortgage loan (FHA or Conventional) even if I am not a co-borrower.
Can you please shed some light on this scenario for us? I'm hoping if I am not on the loan, that he will still have the capability to get financed.
Ask Kate answers: Federal Tax Lien and IRS Payment Plan
As the non-borrowing spouse not going on the mortgage, FHA will still require the lender to analyze your credit report.
At that time, the terms of your IRS Payment Plan would be considered. Go here to understand how FHA looks at Federal Tax Liens in an IRS Payment Plan
If all that is keeping you from applying is the lien, tell your lender you prefer to go on the loan since your IRS payment plan is going to be analyzed anyway.
Many conventional loans bypass the step of including the credit history of a non-borrowing spouse. Ask your lender if this also is a possibility.
Kaleigh, good luck with the IRS payment plan. I hope you can get on the mortgage too.
Best wishes for your home buying,
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