You may not know this, but one place where you can get your down payment from is your IRA – Individual Retirement Account. What’s even better about this is that you may be able to tap into this pool of money – if you are fortunate enough to have it – without penalty if you are a first time home buyer and meet certain requirements. If this is you, keep reading…

Back in 1997 the US Government enacted the Taxpayer Relief Act which made it possible under certain conditions to tap into a traditional IRA or a Roth IRA for the purpose of buying a first home without penalty. Safe to say, as of 2010, you have a lifetime cap of being able to withdraw up to $10,000 from your IRA as a first time buyer.

I’m not a qualified financial planner or tax preparer so I cannot specifically speak to your situation or tell you definitively what you may or may not qualify for as a first time home buyer with using your IRA for your down payment. But I will tell you, there is definite merit with checking into this program if you don’t have a whole lot of money in your checking account but your IRA does.

Oh, and another possibility…are you expecting to get some money from a parent or relative in the form of a gift for your down payment. If so, you may want to check out the rules about getting money as a gift from parents to put into your IRA. You may find that they can gift you money ahead of the time which would allow you to start or add to your IRA and possibly make some interest in your account while you wait. You never know – some parents have this thing inside them when it comes to helping their kids out with retirement.

Finding the right home to purchase is the most exciting part of a real estate purchase, but most people do not realize that some of the most critical aspects of the entire process are the things you don’t do. If you want to conclude the deal successfully, it’s important to know what not to do before purchasing a home.

Avoid making any large purchases

For at least three to six months prior to your planned home purchase, avoid making any large purchases of any kind. This may sound extreme, but potential lenders are going to look at your spending habits and especially at the amount of debt you have already incurred; the more debt you owe, the less they will be willing to lend you for your home purchase.

A really good example is buying a car. You may find a great deal on exactly the model you want, and of course the dealer is going to be happy to help you finance it even if it means an extended loan term, a higher interest rate, or the like. The problem arises when you go to a potential mortgage lender looking for a home loan and they take a look at your income, your cash available, and your debt. Suddenly that car payment looms quite large because it increases your debt to income ratio and reduces the amount of mortgage loan you’re qualified to get.

The same advice holds true for all kinds of other major purchases, such as:

• Furniture
• Electronics
• Appliances
• Jewellery
• Vacations

Always put your home buying plans first, and avoid making large purchases that could derail those plans unexpectedly.

Keep your money safe and unmoved

Potential mortgage lenders will look at all aspects of your finances, and we do mean all aspects. This includes detailed examination of your entire financial situation, especially your source of funding for the down payment and the closing costs. Your checking accounts, savings accounts, certificates of deposit, mutual funds, retirement accounts, and the like are all of interest to your lender and you will be asked to provide at least two to three months worth of statements showing the amounts of money and where they are located.

If you have changed banks or moved money around between or among accounts during the previous two to three months, this can seriously complicate the process of getting the lender to approve your home loan. Why? It might seem tedious and even frustrating, but the lender has a responsibility to fully understand your finances and especially your sources of liquid assets. Anytime you move money around, such as between accounts, from one bank to another, or the like, the lender is going to want detailed receipts, cancelled checks, and everything else necessary to create an accurate paper trail of how, when, and where your money has moved around.

So if you want to make things easier on yourself (and on your loan officer), don’t move money around unnecessarily in the months prior to applying for a home loan.

About the Author:
I was born and raised in Central Toronto, spending my whole life in the neighborhoods that I now work, and in the Toronto Real Estate industry. I understand all the nuances of Toronto’s various communities & what Toronto real estate agents have to deal with.

I have dedicated my education to negotiating, marketing, business development and staying ahead of the curve with technology. I have attended international conferences, understand major agencies like Johnston and Daniel, all of which has helped me learn how I can provide more efficient, effective and thorough service.

From the San Diego Union Tribune:

Ed Smith Jr., president of the California Mortgage Brokers Association, considers himself an optimist. But even as he mingles with convention-goers in Las Vegas, he’s not jumping on any bandwagon predicting an imminent turn in the housing market.

Smith, a 26-year industry veteran who operates a mortgage referral business in Spring Valley, estimates that it could take at least until the dawn of 2012 for the market to settle. In the meantime, the mortgage industry continues to go through tough times.

Independent brokers, who once held an estimated 60 percent to 70 percent of the mortgage market in California, now represent only 15 percent of the market. The nation’s three top banks — Citigroup, Wells Fargo and Bank of America — dominate more than 50 percent of the market, Smith said.

“It’s not good for the consumers if there’s only three choices of lenders,” he said. “It doesn’t give them a lot of latitude to shop around for the best deal.”

In the meantime, Smith said, one of the big topics of discussion among brokers is whether to merge with mortgage banking operations so that they can build stronger competition to the big banks.

When asked for a timeframe on when he sees the housing market turning:

QUESTION: One of the major questions these days is whether the housing market may be approaching a bottom, now that the economy appears to be stabilizing. What do you think?

ANSWER: I usually try to be as optimistic as possible, but I think it could take another 18 to 24 months for the real estate market to settle. There’s a huge “shadow inventory” out there of homes that have not yet been foreclosed upon. Some people say the shadow inventory may total as many as 7 million homes. Those homes are being slowly dribbled back into the market, but if it comes onto the market much faster, it will destabilize the market much faster than it is right now.

In San Diego, I’m not sure how long it will take for property values to get back to the place they were. And that’s not bad, because at the peak of the market, property values were so out of whack that the average person couldn’t pay for a loan. At the top of the market, I wouldn’t have even bought my own house if it was on the market.

Giving interesting names to the generations of the 20th century is a funny habit of social scientists.  The members of a certain generation have been influenced by all the different political and cultural aspects of their time period which gives us the dating.  The baby boom generation, that are people born from mid 40′s till late 50′s, was the most important buying force, or at least until just a few years ago. But now most of these people have retired or are preparing for it. 

At the same time, the children of baby boomers known as Generation X, now in their 30’s or 40’s, have finally acquired the financial ability to purchase recreational property at almost any price.
You will see this change mainly when we compare the results of the first half of this year with the ones from last year.  74 percent of markets surveyed this year reported a trend towards thirty-something buyers buying a wide selection of recreational property products ranging from waterfront cottages to resort condos.  This compares with just 40 percent in 2008.  From January till April 2009, the number of sold recreational properties decreased – at least two thirds of all surveyed markets showed such trend.  However, a lot of major centers are now reporting an increase in buyer activity since the cottage season began.

Highlights of the report:

While the overall supply seems to be reasonable in most markets, the most tight inventory levels are what concerns entry-level products (18 percent of markets report this), as most of the buyer activity was taking place in the lower-end.  Older cottage owners, a lot of whom own their properties outright, are selling to younger purchasers with families.  As the Canadian dollar is now stronger, some American cottage owners in Canada are trying to take advantage of this situation to cash out of the market.  American purchasers have mostly fallen off the radar, with some exceptions. One of the known factors in the marketplace is pent-up demand. For example some buyers who had intended to buy recreational properties in the second half of 2008 decided to defer the transaction till the next year. Older Canadians continue to seek secondary houses in warmer parts of the U.S. such as Florida, Arizona, California, and Nevada. Purchasers from the X Generation are now usually prepared to spend their hard-earned dollars on recreational properties. But at the end of the whole transaction, they want to be sure they’ve gotten the best possible result out of it.

My advice to most people I have gained running a San Diego tile business is to do your flooring.Especially if they don’t have enough money.In other words, they don’t have enough budget for a complete remodeling of their houses.Doing your flooring is the best thing you can do to your house because it provides a good return to your money. Mainly because the flooring runs through the whole house. By changing your flooring into hardwood or tiles, it can really beautify your houses.  You can turn a boring room or house and make it look totally new by just changing the floors.

But most people right now, especially during recession times, don’t have the means to change their whole flooring.I at least tell them to just regularly clean their flooring.If their house is carpeted then they should have it cleaned regularly.  If they are really on a budget I suggest they buy some carpet cleaning supplies and do it themselves. But I make sure that they buy quality products so the cleaning can be noticeable.

But, of course, the best option is to change your flooring. This option will really give a new look to your house. It is a lot less costly compared to a remodel but still can produce a nice looking home.  So when people come into my carpet San Diego business I give them that choice of carpet cleaning or replacing the flooring.I always suggest to them that they just upgrade their floors if they have the means to do it.  But if money is tight cleaning the flooring will do for now.

Get Pre Approved – Get Qualified

A great starting point is to get a copy of your credit report so you know what your credit score is. First, take the time to look over the report to be sure it is accurate. Here are the things that  you will need to get pre-qualified or pre-approved:

• Gather your financial information – 30 days of pay stubs, 2 months of bank statements, last quarterly IRA and 401K statements, last year’s W2′s.
• Research Loan Programs, FHA Mortgages, First Time Home Buyer Programs
• Find a Mortgage Company or Lender to work with – list of questions to ask Loan Officer
• Meet with your loan oficer to determine what price range of home you can afford.
• Determine your monthly payment comfort level.

Shopping For A Home

The first thing you will want to do is find a real estate agent and you can easily find one online or through friends.

A great way to start your home search is to search by price range and location. The agent should set you up on some sort of automated email system that will send you new listings every day. Also be sure to look at PropertyNut.com.

Once you have picked out all of the homes that you would like to visit, it is then time to go and take a tour of each one. Take notes about each home you visit. Trust us on this; you won’t remember the specifics otherwise once you visited more than about 5 homes.

After you narrow it down to the house that is your favorite, then it is time to write an offer with your agent helping you.

If your offer is accepted, your agent can help you make sure that appropriate inspections are scheduled and completed.

Get Loan Approval From Mortgage Lender

If you haven’t given all of the information to the lender to get fully-approved with your lender, now is the time to get them everything so you can be approved for a loan. If you haven’t already, provide your loan officer with 30 days worth of pay stubs, your last two months of bank statements, your last quarterly statements from your IRA/401K’s if applicable, W2′s, maybe your tax returns, and any other information your loan officer might ask for.

Getting Insurance On Your Home

After you are done getting qualified and have your paperwork turned into underwriting now it is time to shop for homeowners insurance. The date of effectiveness on your policy should be the day that you close on your new home and you then own it. Make sure that you get a couple of quotes as there are going to be differences in what you are charged.

Closing Time Means You Now Own The House

Talk to your lender and agent to make sure everything is on track to settle on time about 1 week in advance.  Right before it is time to sign the final paperwork on the house you need to do a walk through.

If you use these steps as a guide, you will have a great homebuying experience and here is another simple Buying A Home Guide.

If this is true, we should be able to do the math and go out and buy a home for its actual value? Right? Not exactly. In the near term prices fluctuate with other factors, like availability of funds and buyer and seller expectations.  A few years ago banks were making subprime loans left and right. Anyone who could qualify at the teaser rate based on stated income could buy a house. The increase in demand drove prices up above the realistic values. Nobody gave much thought to what they would do when the rate went up. They assumed that prices would continue to rise and home loans would be available. But as we all know, artificially inflated prices can’t increase indefinitely. When mortgage payments on those subprime loans increased, it all started crashing down.

The market correction was necessary, but as often happens, it went too far. The mortgage lenders didn’t just revert to more traditional requirements. They made the requirements so stringent that even buyers who could qualify during ‘normal’ times couldn’t get a loan. On top of that, forclosures flooded the market, driving prices below their values. Now potential buyers want to wait until prices have bottomed out. But when will that be?

As it has in the past, the market will overcorrect. Just as we got carried away with optimism when prices were increasing, fear will drive market value too far the other way. When will prices stop falling? A few savvy buyers will realize that the prices can’t go much lower, and they won’t be able to resist the bargains any longer.  If you are able to buy something for less than it’s worth, you come out ahead – even if someone else gets the same thing for a little less the next day. Once it starts, an avalanche of buyers will join in and prices will rise. Most would-be buyers won’t know that’s happened until months later.

Economists are starting to tell us that residential real estate is undervalued in many, but not all, cities. Which areas are those? The areas that saw unrealistically huge price increases are now suffering the largest declines. In a review of Southern California real estate prices, Global Insight said that real estate in Los Angeles is 6.4% undervalued, Orange County real estate is 10.9% undervalued, homes in Riverside-San Bernardino are 15.7% undervalued, and San Diego homes are 21.2% undervalued.

So, should you go out and buy a home in Riverside or San Diego? Well, it depends. Even within an area, the market is different depending on the segment. Currently there are still a lot of distressed properties on the market, mostly starter homes.  Meanwhile, move up and higher end homes are in short supply.  If you’re looking for a starter home, now might not be the right time.  If you’re looking for a move up home, there are some great bargains.  And now interest rates are phenomenally low and there are great tax incentives available to first time buyers and new home buyers.

The problem is that many of the typical first time home buyers (age 20-30) are having a tough time finding a job in California. Unemployment in California is currently hovering around 11 percent and that number is expected to creep up through the end of 2009.

From the LA Times:

Although the often volatile unemployment rate dropped to 11% from March’s 11.2%, the Golden State still lost 63,700 jobs during the month. The number of people seeking work has swelled by 842,800 from a year ago, the state Employment Development Department reported Friday.

Economists predict that jobs will continue to disappear for at least the rest of the year. “The unemployment rate will creep up,” said Esmael Adibi, an economist at Chapman University in Orange. “During the summer months, there is a jump in the labor force mainly because of new college graduates or students seeking temporary positions. Clearly, there would not be that many jobs.”
The grim job market — the worst in almost half a century — has put a damper on the graduation season celebrations of students such as UCLA English major Rachel Beezy.

“I’m doing my very best to stay optimistic, but I’m in the same boat as everyone else,” Beezy said. “It’s a horrible time to graduate.”

Before the recession sank its claws in her dreams, the 28-year-old Van Nuys resident hoped to make a career in film production.

So far, she’s sent out 20 resumes without getting a concrete response.
Now, Beezy said, she’d be willing to go back to the retail management job she held before college. Even a $10-an-hour internship would sound attractive.
Campus career center directors and recruiters agree that they’ve never seen competition as tough as it is this spring.

“It’s unprecedented. We see fewer and fewer firms coming to hire graduating students,” said Gary Greener, associate dean for career services at Southwestern School of Law in Los Angeles.

In a normal year about 600 employers come to interview juniors and seniors at USC, said Eileen Kohan, who runs the Career Planning and Placement Center, but recruiting efforts are down about 30%.

“Every firm that has laid off people in the past year didn’t come,” she said. “It’s been an incredibly difficult year.”

State data bear out Kohan’s observations. In March, nearly one in seven job seekers between the ages of 20 and 24 — many of whom are high school and college graduates — were unemployed.

That’s up 40% from a year earlier, and unemployment among people of all ages with bachelor’s or advanced degrees increased by 50%.

The outlook is even worse for teenagers graduating with high school or general educational development diplomas. Unemployment among 16- to 19-year-olds hit 26.2% in March, up from 18.7% a year earlier.

While it is a great time to be a first time home buyer because of the California 8000 tax credit, the 10000 California tax credit and the soon to be announced FHA bridge loan program, it is only a good time to buy a home if you have a job.

And jobs aren’t as plentiful in California as they have been in recent years.

Maybe.

Here is a brief video where Delores Conway, a California real estate economist, says that people buying a house today shouldn’t expect to double their investment, they can expect to see gains.

Some of the other interesting things in the video:

50% of California home buyers are first time home buyers who will be able to take advantage of the 8000 tax credit.

Historically, California real estate has returned between 3-6% after inflation, except in the last 5 years or so where “double digit returns” were common. 3-6% is higher than returns in the midwest, where real estate there returns 1-3% historically.

In areas where homes have dropped 40-50%, the monthly payment of buying a home is about the same as the monthly rent payment if you were to rent the home.

What does all of this mean?
To borrow a line from all of our favorite Realtors out there… now is a great time to buy!

“What is the difference between getting pre-approved and pre-qualified?”

Did you know that in parts of California right now, there are often multiple offers to buy a house if it is priced right? This means that it is more important than ever to know the difference between getting pre-approved and pre-qualified.

If you are in an area where multiple offers on a house are common, there is one thing in particular that you can do to help your chances of the seller accepting your offer above all the other offers.

Remember — sometimes the “seller” is really “the bank” because it is a bank owned property and this “tip” is one thing that people who work at banks in the REO division actually understand and look for:

Get Pre-Approved and not just Pre-Qualified.

Get Pre-Approved, Not Pre-Qualified
Getting pre-qualified is easy. Usually, it involves having a brief conversation with a loan officer and based on the information that you give him, he can then tell you if you are pre-approved or not.

The problem with this is that it is “garbage in, garbage out” – so if you don’t know exactly how much you make or you don’t list out all of your assets – your “pre-approval” might not be worth the paper it is written on.

So if you called me, told me that you had perfect credit, made a million dollars a month in W2 income and wanted to finance a $200k house — I would say that you are pre-approved based on what you told me.

But if you came to the office, provided paystubs and tax returns documenting your pay history and I pulled your credit and verified everything – then you can actually become pre-approved.

Pre-qualified = the lender takes your word for it.

Pre-approved = you have proven it to the lender.

Of course, becoming pre-approved takes a little bit more work on your part, but when you are just one of 5 offers to a seller? Getting pre-approved can make all the difference. There is usually no fee for getting pre-approved and it is a fairly simple process and well worth your time.

Unless of course you don’t mind submitting multiple offers on multiple houses and just hope that one of them sticks.