Michael Corbett Blog

Recently on Amazon, a reader posted an interesting yet misconceived comment on my book page.   It had said that while my latest book Before You Buy: The Home Buyer’s Handbook for Today’s Market  is an invaluable source for home buying in today’s market ”It is unrealistic because coming up with  20% of the value of a house for a down payment today is almost impossible”

Well, the fact that this reader, or any reader, thinks 20 percent down is “unrealistic” is exactly the reason this book is a must-read – and such an important book for these times.

Now don’t shoot the messenger here but, buying homes with less than 20 percent down is what put so many homeowners into horrible financial positions – houses they ultimately could not afford leading to short sales and foreclosures. It is “unrealistic” for anyone in today’s market to think they should buy a house if they have not yet been able to save up enough for a sizable down payment.

As I explain in the book, you do have options. There are ways to bolster your down payment savings. You can shop for less expensive houses that will match your budget and the money you have saved. Or you can simply wait and continue saving.

Among the many reasons to buy a home you can afford with 20% down is that is simply will cost you less, MUCH less in the long run.

• A $417,00 home @ 5.75% interest rate  with 3.5% down  (402,405 loan amount)

The amount of interest paid over the 30 years of the loan? — $447,421

(Plus you will have to pay PMI until you can remove midway through the loan.

Thus the real figure total of interest and PMI would be closer to $542,856

Vs:

• The same house with the same interest rate and 20% down  (333,600 loan amount)

The total amount of interest paid over the 30 years of the loan?  -$369,655

• Bottom line – You’ll save $173,201 in interest!!!

Buying a home is not an automatic entitlement anymore.  And buying a home with no money down, or little money down is foolish and unsafe these days. If anyone is looking at homes that are out of reach of a 20% down payment, then they need to be more realistic and look at lower priced homes. Homeowners need to protect themselves by not over extending themselves. And remember, just because a bank says you can buy a house for little or no money down–doesn’t mean you should!  Protect yourself, because no one else will. Doing anything other than that? Now that’s unrealistic!

I hope you all had a chance to catch my real estate segment on THE VIEW.

It’s amazing to be in LA and working at Extra on Monday then fly cross country be on set Tuesday am at The View in NYC – as Whoopi and Joy are back stage – and Kirstie Alley and Liv Tyler are in the dressing rooms across from me. I go on set to shoot my segment and, then, within a half hour I am whisked back to the airport to be back in LA by 6:00 pm and home for dinner! It is a whirlwind 24 hours.

The best part is that I was able to get some fantastic and important home buying information out to people. Here is what they wrote on The View website:

On this week’s The View, Real Estate expert Michael Corbett , author of Best selling Before You Buy was here to answer YOUR questions about the real estate market. Below are some tips, answers and advice he shared:

Will Home Prices Go Up?

Michael noted that, while nationally the real estate market is still soft, real estate is ultimately a local business – so you should be concerned with the home prices in your own city/community.

Certain states, like Florida and California, Nevada, home prices will remain soft  for a while. But according to last week’s Coldwell Banker Home Listing Report in many cities – like New York, LA and Dallas – home prices have stabilized, and in some communities (Jackson, MS and Charlotte, NC for instance) real estate prices are going up.

How Much Money Should You Have Upfront for a Home Purchase?

Michael advises at least 20%. For example, with a $350,000 home, he advises that one should put aside $80,000. This would cover the 20% down payment ($70,000), closing costs ($1,800), points on your loan ($2,900) and other misc. expenditures that pop up.

What is the Difference between a Foreclosure and a Short Sale?

Foreclosure = when a homeowner has to stop making payments on the mortgage, so the bank takes the house back.

Short Sale = when a homeowner trying to sell the house asks the bank to “eat” money because they must sell the house for less than it’s worth. For example, a home you owe $350,000 on but is now worth $300,000 forces the bank to eat $50,000.

How to Buy another Home after Foreclosure

Michael gives some simple yet important tips to help get yourself financially back in shape to purchase another home:

* Never max out a credit card
* Never be late or miss a payment
* Keep a consistent employment record
* Save up for a significant down payment

 For more real estate tips get my latest best-selling book: Before You Buy; The Homebuyer’s Handbook for Today’s Market or go to my website; www.MichaelCorbett.com

One of the best ways to stretch your buying dollar is to find a neighborhood that is in transition. Called fringe or transitional neighborhoods, they are typically close to major metropolitan areas and were once neglected and less desirable. Is there a trendy restaurant where a tattoo parlor used to be? These neighborhoods are now beginning to enjoy a new life, and your goal is to find them.

Buying in a transitional neighborhood for your first house allows you to get into the market relatively cheaply and build some equity. Your house gains value as the neighborhood improves. It may not be your dream location, or the seaside beach community you want to retire to, but as I’ve said, over time you will build even more equity and then move on at some point.

But how to find that prefect diamond in the rough?  Here’s two ways:

1.  Wake Up and Smell the Coffee.  Has a Starbucks just opened on the corner or maybe a Whole Foods Market? These are all good signs that a neighborhood is on the upswing. You can bet that big chains like Starbucks spend a lot of money and time analyzing neighborhood potential before they open up a new store. So go ahead, tap into their market research and be their neighbor.

2. One Click for a Trulia.com Crime Check . It may look like an improving area.  But you want to make sure your up-and-coming  block, street and area is safe  and not the center of  a serious crime waves.   Go to http://www.trulia.com/crime/#  Just plug in your city, zoom into to your potential block and get a pretty comprehensive look at what has been happening lately crime wise..  If it looks quiet and surrounded by or adjacent to other low crime areas… you make have found yourself a deal!

For more tips and insights about how to buy Safe, Sane and Smart in Today’s Market.  Order my newest best seller…Before You Buy..The Homebuyer’s Handbook for Today’s Market!