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Archive for the ‘First time homebuyers’ Category

East Ridge is not known as a hotbed of progressive ideas and great housing but city officials are setting out to change that while capturing hearts and minds with a new public relations campaign starting soon.  The Come Home to East Ridge ummm, Welcome to the New East Ridge errr, There’s More to East Ridge than the Flood Zone!* program is aimed at making Hamilton County residents, new & old, think about East Ridge as a great place to live and own a home. Plans are to emphasize East Ridge’s proximity to downtown Chattanooga & East Brainerd businesses while showcasing its affordability, stable home prices, lower taxes and revitalization plans. Low crime rates and lickety split emergency services response times were also mentioned as pluses for those who already live in the 37412.

While the city has a lot to overcome if they truly want to change the image of their fair city, it sounds like they are headed in the right direction with plans to beautify the I-75 Exit #1 area as well as both the Chattanooga & East Ridge sides of the tunnels. Sprucing up the de facto entrance and exit to the city will go a long way toward making East Ridge a player in the competition for Chattanooga real estate dollars. Efforts toward tighter codes enforcement designed to make landlords, and the businesses along Ringgold Road, clean up their properties are already underway. If you ask me, storm water management to help control flooding in those areas that are prone to it would be even better.

Having said all that, these guys really do have a point. Prices are rock bottom in East Ridge but without the crime and marginal schools that you might see in other areas with similar home values. There aren’t many areas in Chattanooga where you can find a nice home for sale at less than $100,000. East Ridge is one of the few. Hey, even if you end up having to pay for flood insurance, your new home is probably going to cost you less each month than something comparable elsewhere. With 100% financing by using THDA grant money, the low overall cost of ownership here might be enough to turn some renters into honest-to-God homeowners. Who knew?

Do you want to be a part of East Ridge’s renaissance? Click to see homes for sale.

*I just made up those names myself. Hmmm, wonder why they didn’t hire me to do the PR?

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{{You’re gonna have to hang in there with me, this one definitely gets filed under ‘boring but important’}}

Today, HUD announced new rules for FHA mortgages that will go into effect in the near future (“summer” whatever that may mean). Those who don’t eat, breathe, and live real estate finance like I do may not know this, but FHA has become the go-to loan for most borrowers, especially first-timers and lower income, but really for everyone who doesn’t have 20% to put down.

Here are the proposed changes:

Anyone with a credit score under 580 is required to put down 10%

Hey HUD, maybe we should call you Captain Obvious! In practice, most banks aren’t lending to anyone with a score of less than 620 these days anyway so this one won’t have much of an impact.

The up front mortgage insurance is being raised from 1.75% to 2.25%

For a $100,000 loan amount, this means that the house would cost you an extra $500 which can be financed into the loan. Again, not great but not a huge deal in the grand scheme of things.

Seller concessions limited to 3%

This is the one that gives me heartburn. What’s a seller concession, you ask? In most cases, it’s your closing costs. With FHA, you can get a loan with as little as 3.5% down. For first time buyers without a lot of savings, that means you can buy a $100,000 house with not much more than $3,500 out of your pocket, assuming the seller pays your closing costs. That last part is the kicker. Currently, the seller is allowed to contribute up to 6%. And 6% is plenty when you are talking about a $100,000 loan. You aren’t usually going to go over $6,000. But you are probably going to go over $3,000, the new limit in this scenario.

And if you are looking at an even smaller amount, say $50,000?  Three thousand dollars would probably cover your closing costs so you could buy a $50k house for as little as $1,750 out of pocket. Now, with the seller only contributing $1,500 toward your closing costs, that almost doubles what you’re going to have to pull out of the old tin can in the back yard. That’s HUGE!  Anyone looking to live in a $50,000 – they’re rare, but they do exist in Chattanooga – probably doesn’t have that extra $1,500.

And that’s why I don’t like this change. Looking at houses in the $200,000+ range? You probably won’t notice a difference. But all of those first time buyers who are near and dear to my heart (yes, it’s far more gratifying to sell someone their first house), to put it bluntly, are getting screwed.

So to all those who need to use FHA financing and who don’t have an extra couple thousand dollars in your mattress, now just became an even better time to buy. Don’t wait until ‘summer’!

Click to search Chattanooga houses for sale.

Disclaimer: all those closing costs number I’m throwing around up there don’t mean that I (or anyone else) is offering a loan with those exact costs, those are big round numbers to illustrate the point.

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Julia Odom enjoys long walks on the beach, debating the restoration vs. renovation question and hanging out with plumbing inspectors

Visit her website to search for homes.

Do you have a Chattanooga area image you’d like to share (credit given),

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Appraiser, inspector. They’re the same thing right? No, absolutely, unequivocally, irrevocably not. Not the same thing at all. You’re going to need both.

I always recommend that buyers have a home inspection done – even if the house is brand spankin’ new.  Appraisers and inspectors are are both people who come out to look at the house and give you an opinion. Sometimes the two get confused in brains that are already spinning with thoughts of underwriting, offers, negotiations, etc (Hey Mr. Buyer, that spinning brain would be yours!).  Here’s a little cheat sheet to tell you who you are talking about and why.

Appraisers

You’re paying for it but the appraiser is really looking out for the lender’s best interest. His/her job is to make sure that the property you are buying is actually worth what you are paying for it. In some cases, they’ll point out needed repairs and require that they be done but it’s really just a cursory look over the home. If there are issues that affect the safety and welfare of the occupants, they’ll require that they be fixed. Especially if you are using FHA financing but increasingly even with conventional loans. Some things that might be pointed out: missing or deteriorated railings, non-functioning HVAC units, obvious mold, or leaky roofs.

The key point to remember with appraisers is that, even though they may point out obvious repairs, their real job is determining a value, a reasonable price for the house.

Inspectors

As I mentioned, there’s no requirement for a home inspection. This guy (sorry, but they almost universally have a mismatched pair of chromosomes) works just for you. He doesn’t have a horse in the pricing race, he’s just there to nitpick. You want an inspector who will point out every flaw, large and small in your new home. Don’t be surprised if he gives you a laundry list a mile long, usually with a guide as to whether each item is a serious issue or just something to think about.

He’s going to test the outlets to make sure they work, check out the roof and look for minor leaks that might not be showing up inside yet. He’ll also make sure there’s adequate insulation and that the plumbing is all working OK. That crack in the basement? He’ll tell you whether it’s normal settling, something to be concerned about or perhaps that you need to talk to someone above his pay grade (that would be a structural expert).

What’s an inspector’s job? To point out everything you didn’t notice that might be wrong with the house. If you find things you can’t live with you can use your inspection contingency (you do have an inspection contingency don’t you?) to back out of the contract without a penalty, i.e. losing your earnest money.

Why do you need two different people to look at a house and give you an opinion? Because they are looking for different things, and effectively working for different people. Don’t fall into the trap of thinking that just because you are getting an appraisal you don’t need an inspection.

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I love working with first time buyer’s – they always ask me questions that prompt blog posts. The most recent one was:

‘Will my taxes and insurance be part of my monthly payment?’

The short answer, which is almost always true is ‘Yes.’ If you have a mortgage, the mortgage holder will usually require an escrow account be set up from which your annual taxes and insurance will be paid.

Dollar signWhat’s an escrow account, Jules?

It’s just a fancy term for any amount of money that is being held by one person but which belongs to another. When you write your earnest money check, it will be deposited into an escrow account to be held until the day of closing.

What do I have to do to get it set up?

Nothing except plunk down some of your hard earned cash. When you get to closing, one of the sections on the settlement statement is ‘pre-paids’. Most of those have to do with your escrow account. You’ll pay for a year of insurance up front and then a few more months to get the escrow account started. You’ll also pay a few months worth of property taxes. Then there will be an adjustment to make sure they aren’t keeping more than necessary in escrow (only those with advanced degrees from MIT have the necessary brain power to understand the formula that determines the adjustment).

So then how do my taxes and insurance get paid?

The bills will be sent to your lender and presto-change-o, they are paid without you lifting a finger. Once a year they’ll do a review to make sure that there isn’t going to be a shortfall or overage in the account. Insurance costs go up & tax assessments change but, as long as you got a fixed rate mortgage (you are getting a fixed rate mortgage, arent’ you??), that’s the only reason your payment will go up. And hey! Sometimes it even goes down a little.

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1135096 Veronica

Many new potential homeowners look at their monthly payment and think ‘Hey! That’s less than I’m paying for my apartment.’ What they don’t always consider is the added cost of having your own place. So what should you consider when you are making out your newly-house-proud budget?

The obvious: Principle and Interest

You can figure this out by clicking over to my handy dandy loan calculator. Your interest rate is going to be a huge factor here. That’s why now is a Fab. U. Lous. time to buy even if you think prices are going to decline slightly in the future. There’s nowhere to go but up with interest rates.

The less obvious, but still included in your basic monthly payment: Taxes and Insurance

You’re going to have to pay property taxes & ‘hazard’ or ‘homeowner’s’ insurance.. Maybe even flood insurance. These items will be paid out of your escrow account and added into your monthly payment.

Still less obvious: Utilities

Sure, maybe you pay your own electric or gas bills at your apartment but how much do you think the size of that new McMansion matters? Not to mention that in your apartment you may be ‘insulated’ by the other units around you. A 1500 sq ft single family home is going to be a lot more expensive to heat and cool than your 800 sq ft apartment. And the gas bill for that gor-geous 1915 Craftsman with the original single paned windows…well, you probably don’t even want to know.  And then there’s the other stuff you may not think about that are sometimes included in your monthly rent: water, sewer, cable, phone, gutter cleaning, lawn mowing, garbage pick up… you get the idea. Now, in most areas of Chattanooga you won’t be paying for garbage pick up but if you opt to move out to the sticks of Signal Mountain or Sale Creek, you might find yourself either paying for it or with a back seat full of junk every week.

The thing no one wants to talk about: Repairs

Yep, that beautiful little brand new construction home o’ yours is going to need repairs. Sooner or later. Whether it’s a toilet handle that needs jiggling or a new roof, you’re going to have to fix something, sometime. And don’t even think about just letting it go. That only makes it worse and costs more in the long run.

You don't want to have to leave it this way

You don't want to have to leave it this way

The fun stuff: Improvements and decor

Maybe you’ve never lived anywhere that you were allowed to paint, put up curtains, change out the tile, add on a new bathroom…you see where I’m going with this. Now that you have that spiffy new place, you’re going to want to invite friends and family over for Thanksgiving. And that means you need a shiny new dining room table twice as big as any you’ve ever had. You don’t want to get to the end of the month and not have anything left over for that gallon of flat enamel that will make your den Absolutely. Perfect.

The moral of the story:

When you are working out the budget for your new house, make sure you consider ALL of the expenses that go into home ownership. Don’t just take the word of your lender who says you can afford a $1,500 mortgage payment. Think it through and consider stepping back just a little so you can not only make your payment, but also buy the groceries to go in that lovely new stainless steel side by side.

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2899916712_947f929fa5One of the things I end up talking about quite a bit as a buyer’s agent is earnest money.

So, Jules, who is Earnest?

Earnest is the guy who whispers in the ear of the seller that you are ‘earnest’ in your intention to complete the purchase of their home. It’s easy to sign a contract. After all, it’s just a flourish of the pen. What’s harder is enforcing that contract. That’s where earnest comes in. If you agree to a purchase and then you decide that you’ve changed your mind without a good reason spelled out in the contingencies, you essentially forfeit your earnest money.

When do I pay earnest money?

In Chattanooga real estate transactions, you will usually write a check at the same time that you are signing the offer to purchase the home. Your check will be held until you actually reach an agreement with the seller. If you never get to the all important binding agreement, your check never gets cashed.*** Once you get to that point, the check will be deposited within a certain number of days – specified in the contract.

Where does my money go?

Generally, the selling broker (that’s your buyer’s agent’s boss) holds the earnest money in an escrow account until the day of closing. The amount of your earnest money will show up on the settlement statement as a credit to the buyer. It effectively is a deposit toward your closing costs and/or down payment. Say you are required to pay $7,000 down, and you have $3,567.12 in closing costs that you are paying out of pocket. You put up $2,000 in earnest money when you signed the contract. The amount that you will need to bring to closing will be $8,567.12 ($7000+$3567.12-$2000).

What if I my financing falls through or I find problems when I do my inspection?

These are standard contingencies. As long as they are present in the contract, you’ll still get your hard earned cash back if you decide to back out. There could be other valid reasons for backing out, depending on how your contract is written, which would also allow for a refund of your earnest money.  Just another good reason to have a buyer’s agent working for you, making sure that the contract is written to your benefit.

If you are sincere in your desire to complete a purchase, you have nothing to fear from earnest. He’s just a way to let everybody involved know that you are no one to be trifled with.

***Clarify this point before you go writing a bad check. This is how we handle it, other companies and especially other states might do things differently.

Contact me for more information about anything you see on this blog.

Visit my website to search for homes.

Subscribe to my blog to stay updated on Chattanooga homes for sale,

real estate news and community interest.

Do you have a Chattanooga area image you’d like to share (credit given)

or a community event to promote?

Email me the details: Julia@JuliaOdom.com

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With foreclosures and other ‘distressed’ sales abounding these days you see a lot of listings with two little bitty words: AS IS

As Is StampSo what does AS IS mean, Jules?

It means that the seller doesn’t want to hear you (or actually me, your agent) whine about all the little things that are wrong with the place. It means that they have no intention of fixing anything. It means that you know you’re buying this house, warts and all, and you aren’t going to come back to the seller after the fact and say that it’s their fault you didn’t know about the warts. It means buyer be wary.

Well then, what doesn’t AS IS mean?

It doesn’t mean that there’s something horrifying lurking behind the drywall (although there could be). It doesn’t mean that you have to go through with the transaction if you find Jimmy Hoffa’s body in the basement structural or mechanical problems with the house – you can still ask for and in almost all cases will be granted an inspection contingency. It doesn’t mean that this is a bad house.

So if you find that your dream home is for sale as is, don’t be scared but do be aware.

Contact me for more information about anything you see on this blog.

Visit my website to search for homes.

Subscribe to my blog to stay updated on Chattanooga homes for sale,

real estate news and community interest.

Do you have a Chattanooga area image you’d like to share (credit given)

or a community event to promote?

Email me the details: Julia@JuliaOdom.com

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