Expert: Jessica Bryan - 11/7/2008

Question
Hey, My name is Amanda, my soon to be husband and I are looking into different options for a first time home buyer. I was wondering if you could give me some of your expertise on a few things. First off We are looking into all options right now, we know we want in the Ga area, and trying to look into different options cause we don't want to start out with something that is going to be hard to afford. We would rather buy instead of rent a home so that we aren't wasting money that could be going on a owned home. With the rent to own homes, About how much of a downpayment is usually needed for this option, or is it possible that some owners might just require the first monthly payment ect.? Also with the Foreclosed homes option, where you can get really good deals on homes, Do you pay a downpayment on those homes or is the in-full amount needed to buy the home. if so in a round about way it is usually about 5% or more for the downpayment cost? Also If you don't have a whole lot of credit, not bad credit just not alot of credit cause of lack of things in our name, Are these two options a good route to explore or are there better ways? Like forsale by owner homes, credit isn't also needed in this case right, with a downpayment? Thank so much for your help, sorry if I've confused you, but just trying to get a little expert advise on the best route to take. Cant wait to hear back from you, Amanda

Answer
Dear Amanda;
It is really great that you are considering all of this!  There are quite a few options open for you but it can be quite confusing.  The first thing to do is to go to a lender and get yourselves pre-qualified.  A lender can help show you which options look the best based on your credit and income.  You will also know how much you can afford.  The next thing to do is to contact a licensed professional sales agent.  I recommend a REALTOR because we answer to a higher professional standard and ethics.  Once you interview a real estate agent and choose someone with whom to work, this person will show you neighborhoods and options.  You can discuss with him/her the best deals and rent to own options as well.  In the rent-to-own scenario, it all depends upon the Seller and the negotiation of the deal.  There are no 'rules'.  The only important factor is that no matter what you negotiate you should make sure to use a good attorney who will get it all in writing and make sure you have a good contract that covers all possibilities that could hurt you.  The rent to own option will undoubtedly require a large security deposit and should be treated as a 'delayed' closing with an earnest money deposit.  However, as I said, everything is negotiable. I would caution you to stay away from a For sale by owner home since you need to have professionals working for you.  There are too many things that can go wrong in a transaction and trouble-shooting is what we do for our clients.  You can find as good or even better deals in homes that are listed with a brokerage. You still need good credit because I assume you would be borrowing the money from a bank to pay for the home.  If it is an owner-financed home, then perhaps they will be more lenient but you still need to show that you can make the payments.

As for a foreclosure, there are lots of hidden costs associated with buying one of these.  The banks seldom sell one that has been fixed up and repaired.  They make no representation and deliver a limited warranty deed.  The homes are "As-Is" and you don't have any history on repairs or problems with the home.  If you find that the roof fails, the plumbing is shot or other maintenance issues are costing you big bucks you have no recourse but to pay.  There are many other homes out there that are languishing on the market with prices being dropped where you can get great deals and still know that there will be adequate disclosures and assistance for a first time buyer.  You will need to have the home inspected and request repairs of certain items so be sure to take that opportunity.  If you are open to it, you might take advantage of a short sale which is a pre-foreclosure situation.  This is when the bank agrees to take a lower amount for the home than what is owed. The owners are still present in this transaction and the home is not sold 'as-is'.  You follow traditional guidelines which protect you, the Buyer, better than a foreclosure. You might want to explore this with your agent.

Good luck and best wishes.

Jessica Bryan

Good luck and best wishes.