Jane Lindenfelser, a 29-year-old education teacher wakes up at 5:30 a.m. to work on her taxes and files through countless stacks of paperwork and housing applications. After hearing about an increase in housing affordability, she is trying to strike while the iron is hot.
The teacher stays in a town-house one-bedroom apartment situated in the urban streets of Baltimore, Md. She was recently offered a promotion at work giving her more incentive to buy herself a home.
“I’m looking for a home now primarily because of the extended tax credit. This also seemed like a good time to buy personally and I’ve decided to stay and settle in Baltimore,” Lindenfelser said.
Buying a house has come at an opportune time since the Maryland Department of Housing and Community Development (MDHCD) announced lowered interest rates under the Maryland Mortgage Program (MMP) in March 2010.
MDHCD Secretary Raymond A. Skinner announced that interest rates for zero point mortgages under the MMP were reduced to 5.25 percent. He also added the rate reduction took effect immediately to increase access to mortgage loan funding.
Approximately, $257 million was provided to MDHCD through the federal government’s New Issue Bond Program (NIBP) which is part of President Barack Obama’s plan to help stabilize the housing market. MDHCD expects to serve nearly 1,600 new homeowners through NIBP and MMP.
“Homeownership is a foundation of strong sustainable communities, and with all the incentives Maryland is able to offer in conjunction with President Obama’s homeownership tax credit, this is a good time to buy,” according to Skinner.
Former Homeownership advisor Shaneece Hudson from Neighborhood Housing Services of Baltimore (NHSB) discussed the benefits of buying a home.
“When you purchase a home, you can use that equity to finance a car, maintain its value or put your kids through college. it’s just a great asset because it’s yours alone, ” Hudson said.
Unlike renting, the occupant makes payments to the landlord and leasing becomes expensive during the long-run because that is money he or she will never get back.
Despite the good news and sheer prosperity of housing in Maryland, Lindenfelser is still taking all precautions and evaluating all the steps she needs to take before she makes a move.
“That’s great news because I definitely have to get a mortgage to finance this purchase. Just to be safe, I spoke with different mortgage bankers to tget pre-approved. I have found this process to be very informative because the actual numbers are very telling in terms of what I can and can’t afford,” Lindenfelser said.
The NHSB has been counseling first-time homebuyers such as Lindenfelser to create and sustain homeownership opportunities through customized lending and consumer education since 1974.
“Informed homebuyers are better equipped to make better decisions especially in regard to taking out loans at a rate they can afford from a bank,” NHSB Education Manager Patricia Hull said.
The NHSB also offers customized loans for first-time homebuyers especially those who cannot afford loans at average rates.
“They refinanced my mortgage, lowered my interest rate to 5.95 percent and cut my monthly payments down by $400. I was so pleased with their service and amazed with their ability to help me,” Baltimore resident Angela Parker said in a client testimonial on the NHSB Web site.
“Everyone should have the opportunity to share in the American dream, which is own a home. It creates wealth, strengthens families and revitalizes the neighborhood,” according to NHSB.
Aside from learning about the home buying process and acquiring a loan, selecting the right real estate agent is also an important factor within the process.
Lindenfelser linked with up a real estate Karin Batterton from Guildford Real Estate through a referral from her colleague.
“I selected my real estate agent after interviewing three other agents. The other agents felt like they were pressuring and clawing for my business,” Lindenfelser said. “I chose her because fit my style and she seemed like someone I could trust,”
The two discussed details over coffee together at Common Ground’s Coffee shop not far from Lindenfelser’s apartment.
Homebuyers or sellers are usually wary of real estate agents because they the agents do not always look out for their best interest.
Most real estate agents in today’s market charge 5 to 6 percent of the sales price of the house for their services, of that amount, half is usually provided as an incentive for the buyers’ agent, making the selling agent take only about 3 percent. But that 3 percent is usually split halfway with the agent’s company, which means the agent is likely to get about 1.5 percent of the sales price according to business columnists Steven D. Levitt and Stephen J. Dubner from the New York Times.
Dubner also added due to the way commission is structured, it is not in the real estate agent’s best interests to get the best price for a home. Getting the most money for their seller is not their priority because they want the customer to buy the house as soon as possible. They may offer a good price but never the best one.
“It is far more profitable for a Realtor to get the seller to take the first reasonable offer of $300,000 that comes along than waiting another week and or two and get $310,000 instead,” Dubner said.
“Making a sale is important but getting the customer or client to have confidence in you and earning their trust always comes first,” Batterton said on her real estate Web site. “I make sure I inform the buyer or seller on homeownership advice so they make the best decisions for the most purchase or sale,” Batterton said.
Lindenfelser is still in the process of searching for a home and is looking to get a mortgage loan from Chevy Chase Bank once she finds a house. During that process she has been trying to calculate her debt-to-income ratio.
“You want to pay the least amount of money out of your pocket and have the lowest monthly payment,” Lindenfelser said.
Debt-to-income ratio compares the amount of debt (excluding mortgage or rent payment) to one’s income. The ratio is best figured on a monthly basis. For example, if one monthly take-home pay is $2,000 and the homebuyers pays $400 per month in debt payment for loans and credit cards, his or her debt-to-income ratio is 20 percent ($400 divided by $2,000= .20).
Mortgage banks use debt-to-income ratio to determine what rate they will lend a loan or if it is even safe enough to lend a loan.
“Letting your ratio rise above 20 percent may jeopardize your ability to make major purchases of a home, keep you from getting the lowest available interest rates and best credit terms,” according to Incharge Debt Solutions, a nonprofit credit counseling Web site.
”I learned a lot about that so I would know where I stand financially,” Lindenfelser said.
With all that taken care of, she hopes to settle in a home very soon.