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Common Misconceptions That First-Time Buyers Often Have

  • "I need substantial down payment." Not at all. Just about all of the first-time homebuyer financial assistance programs provide 100% financing. 100% financing is the most prevalent financing used by first-time buyers today.
  • "I can buy a home if I have only $300 in my bank account". Unfortunately not. The financial assistance programs can cover all of the necessary down payment, but there are other costs that the first-time buyer will incur. When you purchase a home, you will need to put down a good faith deposit of typically between $1,000 and $3,000 right at the start of the transaction. You can retrieve this money and cancel the transaction at any time up to a certain point in the transaction. You will also need to pay for an appraisal (between $350 and $450) and a home inspection (between $200 and $300). You may have to pay some of the closing costs yourself if your agent has not negotiated that the seller pay all closing costs. Many loan programs also require that the buyer has a certain amount of money left over at the end of the transaction acting a reserve. This is known as the lender's reserve requirement and varies for each different loan program. My recommendation is to target a bank account balance of at least $4,000 to $5,000 by the beginning of your transaction. The more in your bank account, the better. Here are 8 Step To Getting Your Finances In Order.
  • "I need to have really good credit to buy a home." Not true, to an extent. Many of the first-time homebuyer assistance programs will allow for a FICO score down to 620. If your credit score is below that, you probably have some work to do to repair your credit. I advise people to get their credit score above 620 before starting the purchase process. The main reason for this is to qualify for loan programs with much better rates and terms. See the section of this web site on Credit Issues for a more detailed discussion on ways to diagnose and improve credit scores.
  • "My consumer debt doesn't have much of an effect on my ability to buy a home." I wish that were true. A little known but surprising fact is that each $100 of monthly debt payment, whether is a car payment, credit card payment, student loan, or personal loan, reduces a homebuyer's purchasing power by about $15,000.  Take a look at the CalHFA Qualifying Chart to see the effect of debt on purchasing power and to see where you are positioned on this chart. If you haven't gone out and bought that brand new car, please don't do it until you have completed your home purchase.
  • "I need to be in my job for a long time to be able to purchase a home." In reality, you only have to have been working in your field for the last two years. New college  graduates can get around this rule if they are working in their field of study. If you are a self-employed entrepreneur, you need to have been self-employed for the last two years, regardless of how long you worked in the same field as a salaried employee.
  • "A lot of these first-time buyer programs require that I remain in the home for many years." None of the first-time homebuyer financial assistance programs have any requirement that you must remain in the home for any amount of time. If you take a look at each of the First-Time Homebuyer Assistance Programs, you'll see that none of them have such a requirement.
  • "The process of buying a home is long and complicated." Only if I haven't done a good job. Take a look at the Home Buyer Process. It's not that complicated.
  • "I can't afford to get the home I really want." It depends on what you decide that you really want. A quick and easy way to determine whether you have the means to afford a home that will make you happy is to take the following two steps: 1) Look at the CalHFA Quick Qualifying Chart and determine your approximate purchasing power. 2) Next, take a look at the homes in your price range in this MLS Search Of the Lowest Costing Homes In San Diego County. See anything in your price range that you like? If so, give me a call and I'll get you fully qualified and find out a lot more about the property for you. If you like what you find out about the property, we can set up a time to go take a look at the property.
  • "Now is not a good time to buy". That's right. Now is not a good time to buy, it's a GREAT time to buy. The market has really changed over the last year. The market we have now is known as a buyer's market. The San Diego housing market is now jam-packed with anxious sellers who will go to great lengths to make a sale. It has been a long time since the number of homes listed reached the current level. It has been even longer since sellers will willing to so much for a buyer and make the concessions they are making now. Prices seem to have leveled out in the San Diego market with some areas doing better than others. The correction appears to be finishing up and prices are expected to beginning rising shortly. No one knows how long this buyers market will last. Mortgage rates are still near all-time lows. If you are thinking of buying but are putting it off to wait until prices start climbing, you may miss the best buyers market of the decade. Owning the real estate in which you live has and always will be the best investment that you can make. Go ahead and read the attached Union Tribune Article which discusses the 10 best reasons for buying in this market. For those who still want to wait, you'll get a kick out of this Wonderful Poem By The Great Sales Master Zig Ziglar.




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Brought To You By
Mark Harmon, Realtor

CalHFA Preferred Loan Officer
USA Realty and Loans

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San Diego, CA 92117