March 10th, 2010
Advice for First Time Richmond Homebuyers
During the height of the Richmond real estate market a few years ago, many first-time buyers were frustrated by high prices and the short supply of affordable homes for sale. Prices have come down substantially in Central Virginia, there’s plenty of inventory, interest rates are historically low and the federal government’s $8,000 tax credit for first-time home buyers was extended to April 30 2010.
Even with the drastic change in the market, it’s not always easy for first-timers. Once-liberal lending standards are much tougher and lower priced homes in good locations are selling. There are still great homes available in Richmond and we are currently in a unique window where both prices and interest rates are low. If you’re in good shape financially, with a positive credit score, this is an ideal time for a first-timer to buy in Central Virginia.
Here are important factors first-time buyers should consider:
PRICES
The fundamentals of the housing market nationwide are showing positives signs as is the Richmond area market. Median sales prices are still substantially down in Central Virginia from the high in 2006, but there are signs the market is beginning to bottom out.
Some experts predict that prices overall may continue to fall as foreclosure sales and short sales (where a home is sold for less that the balance owed on the mortgage) continue to affect many neighborhoods. However, not all homes, in all areas of Richmond will continue to fall in price. If a home is priced right, many times it will sell for close to asking. For example, one house may be listed at $300,000, the current market value – and sell at that price or close to it. Another house may be overpriced at $300,000 and end up selling for far less.
First time homebuyers should first decide what area of Richmond they want to live in . Are you willing to live farther out in say Hanover and get more house? Or do you want sacrifice square footage for a home in the Near West End? Our Buyer’s Agents at Skye Bruce Properties will show you what you can get for your money in different parts of Central Virginia.
INTEREST RATES
Many observers expect 30-year fixed mortgage rates to hover between 5 percent and 6 percent during the first quarter, but then start moving up, nudging closer to 6 percent by year-end. It’s important to keep a close eye on these rate movements, so buyers can calculate the full cost of a home purchase. Remember even if home prices drop 10 percent, a 1 percent rise in interest rates would likely result in the same monthly mortgage payment. Waiting for home prices to drop further can cost y0u more out of pocket in the long term if interest rates rise.
THE TAX CREDIT
Under the extension of last year’s federal tax credit program, an eligible buyer must sign a contract to purchase a principal residence by April 30 and close on the home by June 30. The tax credit of up to $8,000 again has been authorized for qualified first-time home buyers, in addition to a tax credit of up to $6,500 for qualified repeat home buyers. The credit is available to individuals with a modified adjusted gross income of up to $125,000, or $250,000 for couples. Most experts agree that the tax credit has been a huge success in boosting the sagging housing market but believe the government won’t offer another extension. Contact Skye Bruce Properties for more information about this Tax Credit!
AFFORDABILITY
When deciding what kind of house they can afford in Richmond, buyers generally should plan on not spending more than 30 percent of their gross income on the monthly “PITI” (mortgage principal, interest, taxes and insurance) payments. Don’t buy a Richmond home based on what you can qualify for, buy based on what you can afford in keeping with your lifestyle. Remember you don’t want to be house poor! Know your budget and stick to it! Be realistic about what it costs to maintain a home.
THE MORTGAGE
Mortgages are pretty cut-and-dried right these days. Lenders are returning largely to standard 30-year and 15-year fixed mortgages and Federal Housing Administration loans. It’s back to basics with mortgages. Documentation is required for everything: income, assets credit, etc.
New rules issued by the Department of Housing and Urban Development should make it easier for borrowers to figure out closing costs and fees. Within 72 hours after prospective borrowers apply for a loan, lenders are now required to provide a uniform three-page document that spells out the good faith estimate of the loan’s total cost.
FORECLOSURES
While the inventory of foreclosed homes is down from a year ago, the problem won’t be going away anytime soon. Foreclosures take a long time to work out. There probably will be another wave of foreclosed homes for sale in the coming months as banks decide to release more of the properties they own into the market. These foreclosures will help keep prices down. Buying foreclosures can be complicated and many times “the great deal” you thought you were getting may not be so great. Our Buyer’s Agents at Skye Bruce Properties have the expertise and experience to insure the foreclosure you may be considering is a smart buy short term and long term.
SKYE BRUCE PROPERTIES
Need advice with buying your first home? Contact the home buying experts at Skye Bruce Properties. A Skye Bruce Properties‘ Buyer’s Agent will take the time to understand your needs, provide you with information about available homes around Richmond, take you on tours of homes you are interested in, help you secure a mortgage and walk you through the closing process. Email Skye Bruce Properties or visit our new Sales Center on the corner of Nuckols Road and Wyndham Lake Drive.
Skye Bruce Properties, 12000-B Wyndham Lake Drive, Glen Allen VA 23059, 804-467-7041
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