First off, for Gen Y, is right now a good time to buy a property?

Right now is absolutely a great time to buy. The only time that was better was prior to April 2010 when the government was offering the first time buyer tax credit. But Interest rates are a little lower and sellers are a little more motivated right now (September 2010), so right now is a great time to buy a condo, home or duplex. We’ll cover all of these items in this interview, but you can also find a copy of “seven reasons why now is a great time to buy a home” on my website at www.AustinRisingRealEstate.com.

For Gen Y thinking of buying their first home, should they save for a down payment or pay off credit card debt?

It really depends. If your credit card debt is impacting your credit score and limiting you from getting pre-approved for a loan, then you will want to pay off your credit card debt. If your credit score is above 620 and your financial profile is decent, then saving for a down payment and closing costs will be more beneficial to achieving your goal of buying a your first condo, home or duplex.

What types of loans are available to first time home buyers?

There’s four types of loans available: Conventional, FHA, VA and USDA. Conventional requires 5%-20% down FHA requires 3.5% down VA (veterans) and USDA (homes located in rural areas) loans are 100% loans One of the best loans for the first time buyer is the FHA loan. Only required to put 3.5% down. So on a $150,000 home, that’s $5,200 plus around 2% for your closing costs and 1-3% for your pre-paids. On an FHA loan, a buyer can negotiate to have the seller pay up to 6% of their closing costs. On a conventional loan, the buyer can negotiate to have the seller pay up to 3% of their closing costs.  In every city, there is a max you can get approved for with an FHA loan. In Austin that is $288,000. You can contact your local lender and they will be able to tell you the max FHA amount for your area.

What if you have questionable credit?  How do you qualify for a loan?  Will you pay higher interest or need more of a down payment?

If your credit score is above 620 and you can qualify, but have questionable credit, then you will pay a higher interest rate to account for the risk adjustment.

Are there any down payment assistance programs for home buyers?

There typically are down payment assistance programs at the city and county level. Most of these programs require first time buyers to go through a class, pass a test and the assistance programs are only available if the funds are available. If you google your cities housing finance board, you can usually find more information. Family members are also a good source for assistance with a down payment. However, if a buyer is receiving assistance from family, they are required to bring $500 of their own money and the parents money would have had to sit in (or be seasoned) in an account for 2 years and be sourced.

We hear a lot about foreclosures, and that you can pick up a good deal for a low price.  What should Gen Y know when shopping for foreclosures?

Every city is different. I can only speak about Austin when it comes to foreclosures. We’re not seeing too many foreclosures in the central core. When one does come on the market they typically receive multiple offers. However, we are seeing a good amount of foreclosures in the surround suburban neighborhoods such as round rock, pflugerville, cedar park, ect. Here are the six things you need to consider when shopping for a foreclosure:

1. Evaluate Your Budget
2. Run Market Compareables and Don’t Over Pay
3. Consider the Location
4. Get a Home Inspection
5. Forget About Flipping
6. Be Prepared to Wait When You Submit an Offer

What about the incidentals of home buying? Like homeowners insurance, closing costs, and repairs? How should Gen Y budget for those items as they’re working on saving for a down payment?

Gen Y should plan to have 3.5-5% for their down payment, 2% for closing costs and 1-3% for their pre-paids (tax reserves, 1 year hazard insurance, interest and 1st months payment + interest). On a $150,000 that’s roughly around $5,250+$3,000+$1500-$4500 . On an FHA loan that’s roughly around $14,250 and the buyer can negotiate with the seller to pay up to 6% or $9000 on their closing costs. So in the perfect transaction, a buyer could get in to a $150,000 property with a $5,250 down payment.

How do you figure out your credit score?

AnnualCreditReport.com is the ONLY authorized source for the free annual credit report that’s yours by law. The Fair Credit Reporting Act guarantees you access to your credit report for free from each of the three nationwide credit reporting companies — Experian, Equifax, and TransUnion — every 12 months. To order your credit score, visit annualcreditreport.com, call 1-877-322-8228 The rest of the companies you will find online are typically selling services and require you to pay.

Obviously, employment is important to any lender.  How long do you need to be employed to satisfy lender requirements?

Lenders are looking for a buyer to be employed for at least two years. If you are in college, they are looking for you to be in the same line of study or have a co-signer for the same amount of time.

What is the pre-approval process all about?

The pre-approval process is where the lender looks at your financial profile and assesses the buyers risk. They look at your debt to income ration, your credit score, your assets to see if you are a qualified buyer. The main things they look for is are a credit score above 620. Your debt to income ratio is below 56/57%. And you don’t have too much out standing debt. You can contact your local lender to schedule a Remember that lenders WANT to get you qualified and the government WANTS you to own a home, so they will try their hardest to get you qualified.

You can visit our website at www.AustinRisingRealEstate.com/buy/faq to see over 70 first time buyer frequently asked questions.

What are the reasons Gen Y should become homeowners rather than renters?

There’s a lot of reasons. But the biggest reason is you are building wealth instead of helping someone else build their wealth….in other words paying someone else’s mortgage in the form of rent.  Here are the top three reasons Gen Y should consider buying versus renting.

1. The average rent out of college is $946. That’s more than $11,000 a year you are throwing a way towards rent. If you plan to live somewhere for 5 or more years, that’s almost $57,000 you could save, on top of appreciation of the home.

2. Interest rates. Seriously are at an all time low. I know we keep hearing this, but some economist are predicting they will dip down into the high threes around 3.99% early next year. Obviously we don’t have a crystal ball, and a lot could happen between now and then, so if you are considering you should take advantage of interest rates now.

3. The third reason is home prices are trending back up. The recession is behind us and consumer confidence is slowly starting to restore.  As of September 2010, condos, homes and duplexes are probably at their lowest prices. As the saying goes, buy low and sell high. Those are my main three reasons why gen Y should buy a home within the next six months.

To view our report “Seven Reasons Why Now is a Great Time to Buy a Home” remember to visit our website at www.AustinRisingRealEstate.com

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