New Loan Requirements for Getting a Mortgage

It seems that many people would rather visit a dentist than talk to a loan officer to qualify for a mortgage.   And while there is more physical pain from the dentist chair, there is something extremely uncomfortable about having your entire financial history scrutinized and analyzed while your future hangs in the balance.  I get it.  My credit score is in excess of 800 and I still feel weak in the knees when I need to get pre-approved.

Effective January 10, 2014 there are new lending rules that make it essential for potential home buyers to get qualified for a home purchase as soon as possible.  It is not that the criteria to qualify has changed drastically, it that there is now no fudge room.  There is a strict maximum debt-to-income ratio if the lender wants to sell the loan through one of the agencies, such as FNMA, GNMA, VA, etc.  and many banks just are not interested in giving loans that don't qualify to be sold. 

Getting approved for financing is not just about credit scores.  It's about verifying income and assets.  Employment is also verified, which is not as simple as it seems, since today many more people are contract employees or independent contractors.   In addition, all debts and liabilities are looked at, including child support and alimony.  And then there is the credit history.  Mortgage qualifying is also about determining a monthly payment that includes taxes and insurance that works for the buyer as well as determining how much cash will be required at closing. 

There is a lot that can go wrong in this complex formula of mortgage qualification and the sooner that the borrower knows, the sooner it can be corrected.  Whether it is saving more money for the down payment, paying down debts or improving a credit score, time and sound financial advice from a seasoned mortgage professional are key to success.  A loan officer can advise on what bills to pay off first for the most rapid improvement in score and whether or not it makes sense to close accounts or consolidate debts. 

I don't send my clients to a loan officer to torture them.  I do it because I want them to succeed in their goal of purchasing a new home.  And I want them to succeed as painlessly as possible.   There is a lot of information on the internet about mortgage qualification and some of it is good, some of it is totally wrong and all of it is very general.   It does not replace the specific advice that you will get from a loan officer. 

So go ahead and make the call.  Hopefully all your news will be good news.  And save all your fretting for the dentist chair.  Just don't forget to brush twice a day and be sure to floss.  :-)

Pricing Distressed Properties

I recently showed a property that was listed for $70,000 in a neighborhood where many similar properties sold in the $120,000 to $140,000 range.  As soon as my buyers pulled in the driveway, they were spouting off defects and the price tag to fix them.

It didn't get any better when we walked inside.  The windows were old, the carpet was shot and there was an active leak in the basement.

Much to my surprise, the buyers were subtracting these repairs from the asking price and they were getting pretty darn close to asking the seller to write them a check in order for them to buy the property.  The more I tried to talk reason to these folks, the more they gave me the evil eye and acted like I was working for the seller.

 When I work for buyers, I work for buyers.  But I don't like wasting everybodies' time and emotions writing offers that are incredibly unrealistic, unless the buyer will acknowledge that the offer is unrealistic but wants to give it a shot anyway. 

When a house is priced $50,000 less than a similar property in better condition, it is safe to assume that the seller at least tried to price it for condition.  Did they price it fairly?  Only doing some homework will say for sure.  Start with a list of repairs.  Research what it cost to have the work done and subtract that from typical market value in the neighborhood.  Then start negotiating with the seller.

It's Hot around Park Ave Especially for Investment Property!

The temperatures may be falling but the real estate climate around Park Ave is super hot, especially for multi-family investment property.  In the past six weeks or more, I've heard from many investors and want-to-be investors and when we secure an appointment to view these properties, there are usually two or more other investors looking at the same time.

A little free advice here for new and want-to-be investors.  There are three primary ways to loose money on your investment.   

The first is financing.  I meet many investors that want to buy the property as a primary residence simply so they can put a minimum down and mortgage the property to the hilt.  With interest rates so low that is tempting to do but all interest is front loaded, and so this strategy will only work if the investor is committed to a long term investment. 

Next comes maintenance.  Even if you purchase a property in perfect condition, tenants cause wear and tear.  If you can't tell a hammer from a screw-driver and the thought of getting on a ladder breaks you out in a sweat, you will need to hire someone to take care of your property.  So that is profit out of your pocket and into someone else's.

The last biggie is managing your property.  You will only make money if you screen and select good tenants and then collect the rent.  Some investors hire that job out and as a result a good chunk of their income is given a way.

The bottom line, is that there is a lot more work to being an investor than depositing rent checks.  If you need to mortgage the property, hire a handy man plus a property manager, make pretty darn sure that the return on the investment is great enough to cover these expenses. 

2.785% For 30 YR FHA Fixed Loan! Unbelievable!

I saw a couple of posts on Facebook today saying that interest rates for a fixed 30 year FHA mortgage hit 2.785%.  This is so unbelievable that I didn't believe it until I made a few phone calls to confirm it.

For months, I've been bragging about my 3.25% mortgage and I needed to do a 10 year mortgage to get this rate.  Today's deal blows that out of the water.

So my friends, if you're on the fence about buying, now is a great time.  If you're on the fence about selling, these low, low rates will make it a great time to sell.  And if you're on the fence about staying put, consider refinancing.

I'm taking new clients now, so don't hesitate to call.  756-7457 is my office number.

Mary Shelsby
ReMax Realty Group

Music to My Ears

I had a client say something to me yesterday that I don't hear very often.

"Gee, this house looks better in person than it does on line."

Why are those such rare words?  Well, too many homebuyers decide not to look at anything that does look great on-line.

Unfortunately, photos sometimes lie.  And while many of us get lured in by a stunning on-line presence of a so-so house, there are many great houses that get totally ignored simply because the agent didn't have a wide angle lens or didn't know how to shoot a room with lots of daylight streaming into the viewfinder or other photography skill.

The house that my client looked at wasn't the right house for them but I was so pleased that they took my advice and looked beyond the poor images.  It is just a matter of time till we bump into the right house.

Saving $20,000 on the Cost of a Home!

Whew! That feels good. Talk about the deal of a lifetime! We just cut more than $20,000 off the price of our home! Great negotiation skills? Nope! Foreclosure? Nada! Fire sale? No way.




We just refinanced. And no, it wasn’t a 10 point drop in interest rates, either. The secret to our savings is reducing the term of the mortgage. We went from a 15 year mortgage to a ten year mortgage. Our original mortgage would have cost us more than $46,000 is interest over the 15 year term. Our new mortgage will cost us less than $17,000. And the most amazing part of it is our payment will only go up about $150.



When I work with buyers, I am always amazed that they will fight till the bitter end and sometimes walk away from a purchase in which we are maybe two or three thousand dollars apart in price. But then they will get a 30 year mortgage with minimum down payment and end up paying the bank almost as much in interest as they pay the seller for the house.

I don’t dislike banks. If the only house I could buy was one I could afford to pay cash for, well, I would not be a happy camper. And if I could only sell real estate to individuals that can afford to pay cash, I doubt I would sell very many houses. Banks are good and mortgages are great but we should only finance what is necessary. After all, I’d much rather see that $20,000 go towards my vacation than the vacation of some banker!

By the way, interest rates are extremely low, making it a very attractive time to either buy real estate or refinance. Don’t hesitate to give me a call for more information. My office number is 756-7457.

$5,000 Over Asking Is Not Enough!!!

I like it where I live and apparently so do some other people. Last weekend I wrote an offer for $5000 over asking and I’m sorry to say the house went to another bidder! Why did we offer so much? Well, we lost a house the week before by writing only a thousand over asking. That’s pretty amazing considering there are parts of the Rochester area where houses sit on the market for weeks and months, sometime without even a showing.

The Ellwanger Barry neighborhood, also known as the Highland neighborhood, provides a nice stock of classic American Foursquare homes along tree-lined city streets. It is convenient to the U of R as well as Strong and Highland Hospitals and since last week was Match Day (the day when medical students find out where they will train as residents) the competition for housing is fierce.

Fortunately, my clients are not young doctors. Instead, they are a professional family that wants to leave the suburbs for the convenience of city living. They are not on the rigid timeframe although they are anxious to start their new life. Hopefully, the next house we write on will be the one. But if not, it may be the next.



How Disappointed Will You Be If You Lose This House?

No one will sell you a house for less than what you offer, right? So why not start very, very low with the first offer?




Sometimes it works. I’ve had very low offers accepted without a single counter. Almost always it’s because the house has been on the market for a while and the seller is simply sick and tired of the process.



More often, it doesn’t work. My most notable transaction was when the seller was so insulted that she refused to sell to the buyer even after he came back with a full price offer. She still owns that property.



More than once, I’ve seen a second and better offer come in and so the low bidder never gets an opportunity improve their offering.



Most often the low ball offer will be met with a counter. And depending on how reasonable the counter is, I can often predict the outcome. Most people get a bit of a thrill with the start of the negotiation process but they quickly tire of the drama. If counter offers bounce back and forth 3 or more times (unless it’s very minor tweaking of the terms) most often the offer is going nowhere.



So, before you sit down to right a very low offer, ask yourself how disappointed will you be if you lose the property. Only your gut will tell you how to proceed.

140 Days and Counting

When the weather outside is frightful, you can usually count on the real estate phone going to sleep. Not this year! I worked with three different buyers yesterday during the raging snow storm. And of the 7 houses I showed, three of them were new to the market this week. That’s not a typical December day for Rochester, NY.
With less than 140 days to be under contract to qualify for the home buyer federal tax credit, it seemed like a good time to highlight the program. Of course, you will want to consult with your tax advisor or attorney for more specific advice, as the following points are very general.
• Your purchase agreement for a home must be signed no later than April 30, 2010, and the transaction must close before July 1.

• First-time buyers receive a credit of 10 percent of the purchase price, up to $8,000. A first-time buyer is defined as an individual and/or spouse that has not owned a principal residence in the U.S. within the last three years.

• Buyers who owned and lived in their principal residence for at least five consecutive years of the last eight can receive credit of up to $6,500 when they contract to purchase a home before April 30, 2010, and close before July 1.

• The upper income limit to receive the full credit is raised to $125,000 for individuals and $225,000 for couples.

• If the purchase price is more than $800,000, the buyer is not eligible for the credit.

• There is no minimum income for claiming the credit. You qualify for the full credit even if you won’t owe any taxes for 2009 or 2010.

• You can claim the credit when you file your 2009 or 2010 tax return. The law does allow you to apply the credit to your down payment but currently, I know of no bank in New York that will provide such a loan.



If you or someone you know is considering a purchase in time to qualify for the tax credit, please call me as soon as possible. We anticipate an early spring rush this year with lots of competing offers and so now to the time to get pre-qualified and define your search criteria.



Keep warm!

Mary Shelsby

ReMax First

585-756-7457

The Perfect House Verses Compromising

Last night, a young couple that I’ve been working with for several months found a beautiful home in their price range. The kitchen was simply stunning with Shaker style cabinets and a beautiful tile backsplash and floor. Both bathrooms were updated and the hardwoods were in great condition. It was so beautiful that it was easy to overlook that Rt. 490 was in its back yard. The highway was so noisy that we found ourselves yelling at each other in the driveway.




My advice to my clients was to forget the house. Granted, it is unlikely that we will find another house this attractive in their price range but if they buy a house in good condition, they will be able to do the cosmetic improvement and upgrades as their economic situation improves. On the other hand, if they purchase this house, they will never be able to do anything about the highway regardless of how much money they make. From the sullen looks on their faces, I don’t think they liked my advice.



There are almost always compromises involved in buying a house and so I offer the following general guidance for consideration in choosing a property.

Location – While it is possible to pick up a house and move it, it is not very practical. Therefore, I encourage clients not to compromise on location. If you’re not wild about having a gas station next door, chances are good that neither will future home buyers when you go to sell the house.

Layout – It is possible to tear out walls or build on an addition, but it’s not cheap. When you are shopping for a house, take time to assess the layout. Are there enough bedrooms and baths? How’s the traffic flow? Does the kitchen have a good design and room for storage?

Mechanicals - When I bought my first home, the first major improvement was to install a liner in the chimney. It was expensive and I couldn’t even see it. There just was no inviting people over to see my new chimney liner! Eventually, everything in a house wears out. Roofs, furnaces, windows all have to be replaced from time to time. When home shopping, assess the mechanicals and be very conscious of their lifespan and cost to replace.

Cosmetics – Everyone falls in love with a beautiful home, myself included, and so it is difficult to convince buyers that this should be their last consideration and first item to compromise on. Think about it. If you had $10,000 to spend on your home would it be more fun to pick out roof shingles or kitchen fixtures? Almost every house can be made attractive, especially if you paid attention to layout. And if you don’t feel that you have the talent or vision to make your home beautiful, there is an abundance of good designers in the Rochester area.

Again, I point out that these considerations are very general and there are special circumstances. Buying a house is a big decision.  Hopefully, you can find a house that is perfect in every way.  But if not, be very aware of what your compromises are.



Mary Shelsby

ReMax First

585-756-7457

A Few Thoughts About Seller Concessions

It seems like the topic of seller concessions keep coming up during the negotiation processes. Often, we will be receiving a counter offer from the seller when my buyer calls me up. “My dad says the seller should be paying my closing costs!”




FHA and VA mortgages allow for a seller to pay the buyer’s closing costs up to an amount equal to six percent of the purchase price. For most conventional mortgages, three percent seller concessions are allowed. The seller paying the buyer’s closing cost sounds like a gift, doesn’t it? Something we should negotiate for, correct? I don’t necessarily agree.

I contend that most sellers know what they need or want to net from the sale of their property. And if there are going to be seller concessions thrown in, the seller is going to demand a higher price. So, in effect, seller concessions is another name for a buyer financing their closing costs.

Now, if a buyer is short on cash and needs seller concessions, they are a great and wonderful thing. But if a buyer has adequate funds to close, I believe they will be better served by getting a lower price for the property and lower monthly payment.

I am not anti- seller concessions. I am anti “buyers thinking this is a gift from sellers and not understanding they will be paying interest on those closing costs for as long as they hold that mortgage.

We are finally enjoying summer-like weather in Rochester.  I hope you are enjoying it.

Buy Before Labor Day!

I am advising all of my first time home buyer clients to be under contract by Labor Day to qualify for the federal tax credit being offered to most home buyers that have not owned a home in the past three years. I don’t really think it is going to take 80 plus days for a transaction to close but I do anticipate gridlock at banks and attorney offices. I do know of several real estate attorneys that have plans to keep their office open until midnight if necessary to close every transaction that is clear to close before the December 1 deadline.


My biggest concern is housing inventory. Inventory is tight right now, especially homes priced less than $130,000. For example, I started working with new clients just over a week ago that want to buy in the city of Rochester near the U of R. To start their search, I called on 12 listings to schedule an appointment. I could only get appointments at 7 of them because the rest had accepted offers. Of the 7 properties, 2 had offers in that were being negotiated and one smelled so bad we never made it to the second floor. One home was really nice and when I called the next day to schedule a second look, four offers had arrived. This week, 4 new listing came up that met their criteria but 3 of them sold within 12 hours of being listed and the 4th was liked by her but not him. We’ve decided that we’re going to step our search up a notch or two.

Other areas of the city are selling very rapidly as well. The Culver-Winton and Browncroft neighborhoods are definite hot spots. Outside the city, starter homes in the Brighton School District seem to be sold even before they hit the market. And as we count down to the deadline imposed by the Federal government, I anticipate inventory to get tighter and competition more fierce. And so, again, I urge buyers to try to be under contact before the Labor Day holiday.

Multi-Family Units & the Federal Tax Credit

I learned something new today regarding the Federal Tax credit for first time home buyers (defined as not owning a home in the past 3 years.) If you purchase a 2-family unit as your primary residence, you are only eligible for half of the tax credit and only a third of the credit if you purchase a three-family unit, etc.



There are still no local mortgage lenders that are providing a short term loan so that the tax credit may be used for closing costs. Since Labor Day weekend is the realistic cutoff to have an offer accepted in order to close before the November 30th deadline, I'm no longer optimistic that this loan is even going to be offered. Most lenders are now advising that buyers get a gift from a family member and give a gift back after closing.



Sales are still brisk in Rochester, with houses in the North Winton area selling within hours of being listed. If you'd like more information about buying in the Rochester area, consider signing up for my Buyer Seminar scheduled for Wednesday, June 24, 6 to 7:30 pm.

Home Buying Seminar - Wednesday, June 24, 6 to 7:30 pm

I've not done a home buyer Seminar in a couple of years but there is so much good stuff going on right now with the $8000 first time home buyer credit that the timing just seems right. So mark your calendar or tell a friend.

Wednesday, June 24, 6 to 7:30 pm at 2024 W. Henrietta Road, Suite 2A; which is the home office of First Rochester Mortgage Corp.

I'm real proud of the impressive panel of real estate professionals that have agreed to help with this project.

* Home Inspector Adam Backus of Pillar to Post will share tips on what to look for before putting in a purchase offer.

* Attorney Steve Kruk of Kruk and Campbell will discuss the $8000 Federal Tax Credit for first time home buyers.

* Steve D’Amico, Vice President of East Cap Mortgage will chat about the current mortgage environment.

* Mary Shelsby, Broker Associate with ReMax First will offer advice on the great adventure of finding the perfect home.

We will be serving food, so it is crucial for an RSVP. If you’d like to attend but this particular day or time are not convenient, please let us know so that we can schedule another event or a one-on-one consultation. RSVP to Mary Shelsby at MShelsby@gmail.com or call 585-756-7457.

If you RSVP before Friday June 19th, I will send you a coupon for $200 off your closing cost from eastCap mortgage.

Cash for Buying a House

For the past two weeks or so, there have been rumors galore that first time home buyers will be able to borrow their federal tax credit in order to use that money for closing costs and down payment towards the purchase of a home. The details have not yet been worked out but I think this is going to happen. There are some technicalities that have to be worked out because basically you are not suppose to borrow money in order to have the funds necessary to qualify for a mortgage. Hopefully this will be worked out soon because there is not a lot of time left in order to qualify for the tax credit. The purchase must be closed before December 1, 2009.


I have also heard rumors of homebuyers amending their 2008 tax returns to claim the credit before they close on a home in order to get the money early and use it at closing. I’m not a lawyer and this is not legal advice BUT I don’t recommend you doing this. Lying to the federal government so that they will send you thousands of dollars doesn't seem like a prudent advice for individuals that enjoy the simple things in life, like freedom.

Anyway, I’m working with plenty of first time home buyers right now and questions keep coming up about the disbursement of money, i.e., when and how much. Here are some general guidelines.

When you write a purchase offer for a property, you need to be willing and able to make a good faith deposit within 48 hours of when your offer is accepted. Deposits are a minimum of $1000 and are made payable to the listing broker. That money is held in escrow (not given to the seller), is refundable if the contract is canceled due to contingences, and is used towards the closing costs or down payment of the property.

Generally, the buyer has up to one week to conduct inspections of the property and these are done at the buyer’s expense. Inspections include a home inspection ($300 to $500), radon test ($150 to $200), mold inspection ($200 - $500), chimney inspection ($125 0 $200) ect. In addition, if the house is on septic system and/or has a well, they will need to be inspected. It is not unusual for the seller to pay for these inspections but occasionally the buyer will prefer to pay for these themselves just so that the inspector works strictly for the buyer. Well inspections and water testing can run from $35 to $250 and septic pumping and inspection is $200 to $400.

The next outlay of cash is usually to the mortgage lender. Some lenders will collect an application fee at the time the mortgage application is made ($200 - $300). Nearly all lenders will require that the appraisal be paid up front ($250 - $400).

Things get quiet after mortgage application and the next big expense is homeowner’s insurance. Mortgage companies require that you pay for the first year of insurance up front and that the insurance binder is faxed to your attorney before closing. Insurance premiums are based on the replacement cost of the property plus there is consideration of personal possessions, so I won't dare to quote a range for homeowner’s insurance, but do encourage you to shop around.

The day before closing, you will receive a call for your attorney’s office telling you how much money to bring to closing. Hopefully, any surprises with this phone call are good ones, as you will have received and signed a “Good Faith Estimate” at the time of mortgage application. Some of the language on the GFE is confusing to the layman. The GFE will give a total of closing costs, prepaid items which includes interest and mortgage insurance and the down payment. The GFE should include “Total Estimated Funds Needed to Close” and this should be fairly close to what you are asked to bring to the attorney’s office.


I hope this helps clarify how much money is needed when in the home buying process. If you’d like more information or a consolation, don’t hesitate to give me a call.

The Seach for the Ugly House

Some of my clients think I'm a little crazy when I advocate for buying ugly houses. Now I'm not talking butt-ugly. I'm talking about the type of ugly that a coat of paint or perhaps new carpet will fix. And I advocate for that type of house because that is where the best deals are.

Houses with "Pottery Barn Decor" are fun to look at but you will "ohh and ahh" all the way to the bank if you purchase this type of house. Sparkling clean and tastefully decorated houses command top dollar but keep in mind that the furniture and art work will be gone when you move in.

Everybody wants to buy a beautiful house. It's just not as exciting to tell all your friends, "Well, it has green and orange shag carpeting from the '70's BUT the roof is new and the furnace is only a couple of years old!"

Here are a few tips for ugly house shopping.

1. Do your homework so you can budget for remodeling jobs. Kitchens, for example, and be remodeled for a few thousand dollars or tens of thousands, depending on your standards. Even wall-to-wall carpeting comes in a wide variety of designs and quality and so no real estate agent can honestly give you a ball-park figure for these projects.

2. Have a checklist so that you are certain to check all the mechanicals, such as electric, hotwater heater, roof. It would be down-right depressing to have an ugly house that also leaks every time it rains. This is not to say you won't have the house inspected, but you should check for obvious problems before you put in an offer.

3. Analyze the layout. This is especially important in kitchens. You may be able to improve its looks but it also needs to function well.

4. Don't be afraid to ask for help. If you'd don't know how to decorate, hire an interior designer. Generally, they charge a few hundred dollars for an initial consultation which is a bargain if you saved thousands on the purchase.

Want to go ugly house shopping? Give me a call. I don't mind showing you beautiful houses as well.

www.RochestersBestHomes.com

Getting a Mortgage in 2009

I am running into buyers that cannot be convinced to sit down with a mortgage loan officer to be pre-approved for financing early in the home searching process. Perhaps if I share a true life story about getting a mortgage in 2009, they will be more receptive to my nagging!

A client that I've worked with for several years was pre-approved for financing with a score approaching 800. During the time that he was shopping around for investment property, he made a major purchase on a deferred payment plan. The payment plan was a new line of credit and adversely effected his credit score by 70 points! He no longer qualified for the mortgage because his credit score was 7 points too low and he was stunned. He assumed that because he paid all his bills on time his credit was excellent. To make this even harder to understand, this buyer has enough cash in the bank to make a cash purchase but the lenders absolutely will not give him a mortgage.

In another situation, I had a client who's credit card company simply reduced the line of credit because of the credit crunch. Initially, my client was not the least bit concerned because she doesn't carry high balances but when she applied for a mortgage, she didn't qualify for as good of a rate as she had three months earlier. Her credit scores increased significantly because the reduction in the line of credit meant suddenly she had a higher debt ratio to credit available. It was the same effect as if she had made a major purchase on credit but this was totally not a result of her actions!!!!

There are many things that effect the FICO score that is used to qualify an individual for financing. Payment history is very important but so is the amount of debt owed as well as the number of new credit accounts opened and the length of the credit history. And from time to time, I still run into buyers that do not have any credit history which makes it just as difficult to get a mortgage as bad credit.

If you are thinking about buying real estate and have not recently won the lottery, please, please, pretty please start the process with a meeting with a mortgage loan officer. Not only will you avoid waisting a lot of time, you will be much less likely to have surprises and disappointments when you find a property that you want to purchase.

Hot Properties

Perhaps the fasting moving properties these days are single family homes for less than $100,000. It seems like most times when I call to get an appointment for one of my buyers, I'm told there is already an offer in. Dang it!

Here is a list of approximately 60 open houses this weekend of single family homes in Monroe County listed for $100,000 or less. Enjoy the great weather and call me if you need real estate assistance. Customer Full Report Open House Report

By the way, the photo was taken on University Ave in the City of Rochester. It's a lovely place for a walk.

Advice For First Time Home Buyers

I got an e-mail today that was very similiar to many that I've received in the past. It read, "My husband, Peter, and I are thinking about buying a house in the near future as we are quickly outgrowing our apartment (we have 2 young children). We have so many questions, and have no idea where to start. Do you have any advice?"



I referred them to a blog that clients of mine did several years ago whereby they documented each step of their journey to buy their first home. It's very entertaining yet educational. Of course, because it is in blog format, the end of the story is on top. To follow their story, you must start at the end of the blog, which is their first post. To check it out, go to http://prinzihouse.blogspot.com/.

In much less detail, the basic steps for buying a home follow:

1. Get pre-qualified for financing. I can recommend someone that will review your credit and income to advise what type of financing (FHA, Conventional and/or SONYMA) is best for you as well as how much you can/should spend for a home.
2. Meet with a realtor to go over the process, paperwork and to discuss what are priorities are for a home.
3. Look for property on the internet, do drive-bys and schedule appointments through your realtor.
4. Find the house of your dreams and submit a purchase offer.
5. Once the offer is accepted, you usually have a week or so to complete inspections and shop for a mortgage.
6. Closing is generally 45 to 60 days after the offer is accepted.
7. Live happy ever after.

A Hedge Against the Economy

Several weeks back CNN Money Magazine predicted Rochester's housing prices to increase 2.7%, ranking it second in the country for fastest growing markets. And while that is very good news for the Rochester real estate market, there are a few things to keep in mind. First off, this is only a prediction. Second, this is a cool off of the 4 to 6% appreciation we've been seeing in recent years.

As I work with buyers, especially first time buyers, I urge them to consider shorter term financing, even if it means purchasing a less expensive property. In my opinion, that is the greatest hedge against today's uncertain economy.

Case in point, consider 137 Boardman St (www.RochestersBestHomes.com/811190 ) listed at $96,500 with property taxes of $2,285 per year. Let's suppose we come to terms with a purchase price of $93,000 and we plan to put 5% down ($4,650) which means we are financing $88,350. Let's say our interest rate is 6.125%.

For a 30 year mortgage, consider the following:

Monthly principle & interest is $536.82 (Of course, that does not include taxes of $190.42 which would make the payment $727.85) After five years, the balance of your loan will be approximately $81,500. That means, of the nearly $35,000 you send to the mortgage company over the period of 5 years, only $6,850 is used to pay down your loan.

Now, let's look at a 15 year mortgage. Sometimes you can get a better interest rate on a shorter term loan but for the sake of comparison, let's stick with the 6.125% Monthly principle & interest is $751.52 and at the end of five years, you will have paid down your loan to nearly $65,000. Instead of having $7000 in equity, you will have approximately $23,000!

Most banks also offer 20 and 10 year mortgages. Often buyers will not even inquire about a shorter term mortgage because they assume they can't afford it. In my opinion, they can't afford not to! When shopping for a mortgage, ask your lender to also provide a good faith estimate for a 20 year and 15 year mortgage and go with the shortest term mortgage you can possibly afford.