Homeownership

Going from Section 8 to Homeownership

 

 

EANDC – East Akron Neighborhood Development
HOMEBUYER EDUCATION
This course explains the steps in the home buying process and the key professionals who make up the home buying team. After completing this course participants are better prepared when selecting lenders and loan products. Topics covered include:

• If you are ready to buy a home

• How to manage your money

• How to understand credit

• How to rebuild your credit

• How to shop for a home

• What the mortgage loan process is like and how to apply

• What happens during the closing

• How to maintain your home after you buy

Next course is available April 3rd 5-9pm sign up online!

THIS COURSE IS ALSO AVAILABLE ONLINE!If you are unavailable during our scheduled class times, eHome America offers an online course. NOTE: THE ONLINE COURSE HAS A $99 FEE. We do not charge for our classes.

Habitat for Humanity of Summit County

Requirements to apply:

1. Need for adequate shelter

2. Ability to pay the monthly mortgage which averages between $450 and $650 per month

3. Have a total debt to income ratio of 39% or less (divide monthly debt by monthly income)

4. Willingness to partner with Habitat for 250 hours of sweat equity per adult by building homes and attending educational classes for homeownership

5. Decent and responsible credit including:

6. Bankruptcy fully discharged for one year

7. No court ordered debt

8. All family members to live in the home must pass a background check

Effective September 27, 2017, Habitat requires a $10 (Non-refundable) Application fee to cover part of the cost of the credit report for the Application for Homeownership. Submit a check or money order for $10 payable to “Habitat for Humanity of Summit County” when you turn in your application for homeownership. We do not accept cash or credit cards. To complete an application, you will need to know the following information:
Gross Monthly Income (income before taxes are taken out), Monthly Expenses, Long Term Expenses (i.e. credit cards, car loans, student loans), Landlord Information – name, address and telephone number
The entire process for a Habitat home, should an applicant be approved, can take anywhere from 12 to 24 months to complete.

FHA Loans info provided by www.invetopedia.com

What is an FHA Loan? An FHA loan is a mortgage issued by federally qualified lenders and insured by the Federal Housing Administration (FHA). FHA loans are designed for low-to-moderate income borrowers who are unable to make a large down payment.

(update)As of 2018, these loans allow the borrower to borrow up to 96.5% of the value of the home (with a credit score of at least 580; otherwise, a 10% down payment is required). The 3.5% down payment requirement can come from a gift or a grant, which makes FHA loans popular with first-time homebuyers.

Who are FHA Loans for?

FHA loans are offered to low-income individuals who have credit scores as low as 500. Individuals with a credit score between 500-579 can obtain an FHA loan with a down payment of 10%; individuals with a credit score higher than 580 can get an FHA loan with as little as 3.5% down. The Federal Housing Administration does not lend the borrower the money to take on a mortgage or to buy the house. Rather, the borrower pays a monthly or annual mortgage insurance premium to the FHA to insure the loan, which the lending institution issues to him or her. In case of default, the lender’s financial risk is minimized because the FHA would step in to cover the payments. Having no credit history is not a problem with an FHA loan. Instead of your credit report, the lender may look at other payment-history records, such as utility and rent payments. Even people who have gone through bankruptcy and foreclosure may still qualify for an FHA loan. However, the lower the credit score and the lower the down payment, the higher the interest rate.

How FHA Loans Work

In order for an FHA loan to be approved, the borrower must have mortgage insurance. An FHA loan requires two types of mortgage insurance premiums (MIP) to be made by the borrower – an Upfront Mortgage Insurance Premium (UPMIP) and an Annual MIP. The upfront MIP is equal to 1.75% of the loan amount (as of 2018) and is paid at the time of closing. A borrower who was issued a home loan for $350,000 will have to pay a UPMIP of 1.75% x $350,000 = $6,125. The payments are deposited into an escrow account set up by the US Treasury Department, and the funds are used to make mortgage payments in case the borrower defaults.

The annual MIP payments are made every month by the borrower. The payments vary according to the loan amount, length of the loan, and the original loan-to-value ratio (LTV). The typical MIP cost is usually 0.85% of the loan amount. Following our example above, the borrower would have to make annual MIP payments of 0.85% x $350,000 = $2,975, or $247.92 monthly. This is to be paid in addition to the cost of UPMIP.

When you buy a home, you may be responsible for certain out-of-pocket expenses such as loan origination fees, attorney fees, and appraisal costs. One of the advantages of an FHA mortgage is that the seller, home builder or lender is allowed to pay some of these closing costs on your behalf. If the seller is having a hard time finding a buyer, he or she might just offer to help you out at closing time as a deal sweetener.

Homeownership: Ohio
Owning a home is a big part of the American Dream. Here are some resources that can help you buy, maintain and keep your home.
Getting Started
Housing counseling agencies – free or low-cost counseling services for buying, renting, defaults, foreclosures, credit issues and reverse mortgages
Predatory lending – beware if you’re buying or refinancing your home; don’t become a victim of unfair lending practices

Buying a Home
Assistance programs – resources and programs to help you buy and maintain your home
HUD homes for sale
Homeownership vouchers – some public housing agencies help you become a homeowner through the Housing Choice Voucher Homeownership Program
Owning and Maintaining Your Home
Home repairs – money for home improvements and repairs
Avoid foreclosure – don’t lose your home

Land Contract info provided by www.nolo.com
A land contract is a form of seller financing. It is similar to a mortgage, but rather than borrowing money from a lender or bank to buy real estate, the buyer makes payments to the real estate owner, or seller, until the purchase price is paid in full.
Why Are Land Contracts Used?
As with other types of seller financing, a land contract may be advantageous to both buyer and seller.
Benefits to buyers.  There may be a buyer interested in the real estate for sale but who, because of their credit history or other reasons, cannot obtain approval for a needed mortgage. The parties can enter into a sale by land contract so that the buyer makes monthly payments directly to the seller.
Benefits to sellers.  The seller does not receive the full purchase price up front, like the seller would if the buyer used a mortgage or paid all cash, but the seller may have more options for potential buyers. Also, the seller may be able to negotiate a higher purchase price on the property by offering a sale by land contract. The seller may also require and receive a large cash down payment.
When Does the Buyer Become the New Owner of the Land Contract Property?

While the buyer is making payments to the seller, the buyer is considered to have an “equitable title” to the property. As an equitable title holder, the buyer has an interest in the land contract property and the seller is precluded from selling the property to a third party or subjecting the property to a lien or encumbrance that would interfere with the buyer’s interest in the property.
The “legal title” to the property remains with the seller until the buyer makes the final payment. When the final payment is made, and all conditions of the land contract are met, the deed to the property will be filed with the appropriate government office, such as the county register of deeds, naming the buyer as the new owner of the property.

What Happens if the Buyer Fails to Make the Land Contract Payments Due?

If the buyer defaults on the land contract, or fails to make the monthly payments to the seller as required, the seller can file a court action called land contract forfeiture. Forfeiture will result in the buyer “forfeiting,” or giving up, all money paid to the seller for the property pursuant to the land contract and the equitable title of the buyer will be extinguished. In other words, if the buyer fails to pay, the seller keeps all money received, plus the seller keeps the real estate.
The seller takes a risk selling by land contract because the seller does not receive the full purchase price at the time of sale, but a forfeiture right protects the seller from a buyer who fails to pay allowing the seller keep payments and a usually large down payment made by the buyer while retaining the property to offer for sale to someone else.

To learn about the process for purchasing real estate using a land contract see the Nolo article,  Closing on a Land Contract.

Does an Attorney Need to Review a Land Contract?

Land contracts may be a good, or sometimes the only, option available to buyers and sellers of real estate. Real estate rules vary by state, so it is important to consult with an experienced real estate attorney to draft a land contract in order to allow for appropriate terms and to be able to enforce a forfeiture action, if needed by the seller. For a list of  real estate attorneys in your state, see Nolo’s Lawyer Directory.

Mortgage Lending info provided by http://www.investinganswers.com/financial-dictionary/real-estate/mortgage-1608

WHAT IT IS:
A mortgage is a loan in which property or real estate is used as collateral. The borrower enters into an agreement with the lender (usually a bank) wherein the borrower receives cash upfront then makes payments over a set time span until he pays back the lender in full.

HOW IT WORKS (EXAMPLE):
Mortgage loans are usually entered into by home buyers without enough cash on hand to purchase the home. They are also used to borrow cash from a bank for other projects using their house as collateral. There are several types of mortgage loans and buyers should assess what is best for their own situation before entering into one. Types of loans are characterized by their term dates (usually from 5 to 30 years, some institutions now offer loans up to 50 year terms), interest rates (these may be fixed or variable), and the amount of payments per period. [If you’re ready to buy a home, use our Mortgage Calculator to see what your monthly principal and interest payment will be. You can also learn how to calculate your monthly payment in Excel.] Mortgages are like any other financial product in that their supply and demand will change dependent on the market. For that reason, sometimes banks can offer very low interest rates and sometimes they can only offer high rates. If a borrower agreed upon a high interest rate and finds after a few years that rates have dropped, he can sign a new agreement at the new lower interest rate — after jumping though some hoops, of course. This is called “refinancing.”

WHY IT MATTERS:

Mortgages make larger purchases possible for individuals lacking enough cash to purchase an asset, like a house, up front. Lenders take a risk making these loans as there is no guarantee the borrower will be able to pay in the future. Borrowers take risk in accepting these loans, as a failure to pay will result in a total loss of the asset.

Home ownership has become a cornerstone of the American Dream. For most people, their home is their most valuable asset. Mortgages make home buying possible for many Americans. Mortgages are not always easy to secure, however, as rates and terms are often dependent on an individual’s credit score and job status. Failure to repay allows a bank to legally foreclose and auction off the property to cover its losses.

Property Tax info provided by https://smartasset.com/taxes/property-taxes

Iif you purchase a home you’ll have to start paying property taxes. Your property tax liability will depend on where you live and the value of your property. Considering a home purchase or a move? Make sure you take property taxes into account when you’re making your decision. High-property tax areas have great amenities, but you’ll pay for them.

How do property taxes work?

Property taxes are an ancient form of taxation. In the US, property taxes pre-date income taxes. Today, some states don’t levy income tax, but all states (and Washington, D.C.) have property taxes. They’re taxes levied on the value of property owned by local residents. State governments like them because they’re a relatively stable source of funds.

For state and local governments, property taxes are an important resource. They’re a big source of revenue for infrastructure, public safety and public schools. If you have kids or are planning on starting a family, you’ve likely thought about how you can position yourself in an area with excellent public schools. In most cases, this will require you to live in an area with higher home values and higher property taxes.

Before we get into the details of how property taxes work, let’s define a couple of key terms. First up, “assessment ratio.” The assessment ratio is the ratio of the home value as determined by an official appraisal and the value as determined by the market. If the market value of your home is $250,000 and the assessed value is $200,000, the assessment ratio is 80% (200,000/250,000).

Second, let’s talk about “millage rates.” The millage rate is the amount per $1,000 of property value that’s levied in taxes. Because they’re divided by 1,000, millage rates are expressed in tenths of a penny. 3 mills is $0.003. 0.003 x $300,000 assessed value = $900 in taxes owed.

The market value of your home multiplied by the assessment ratio in your area equals the assessed value of your property for tax purposes. Subtract any exemptions (see below) for which you’re eligible and you get the taxable value of your property. That taxable value gets multiplied by the sum of all applicable millage rates. That tells you the property taxes owed before any credits. Subtract any credits you’re eligible to claim and you get your property taxes owed.

The way you’ll pay the taxes you owe varies from place to place. Some people pay extra each month to their mortgage lender. The lender keeps that money in escrow and then pays the government on behalf of the homeowner. Other people pay their property tax bill directly to the government either monthly, quarterly, semi-annually or annually.

Homestead Exemptions

A homestead exemption is a provision in the law that shelters a certain amount of property value from the assessment that determines taxation. Translation: a property tax break. Say you live in a house that’s worth $220,000 and you live in a state that offers a property tax exemption on the first $20,000 of home value. If the exemption is automatic (or if you apply for the exemption and your application is approved) your home is taxed as if it were worth just $200,000. This only works for primary residences. You won’t get a homestead exemption on your ski chalet. Some places have special homestead exemptions for seniors, veterans and residents with disabilities.

Property Taxes by State

Although every state levies property taxes, the property tax regimes vary considerably. And because local governments impose their own property taxes, the town or city where you live can play a big role in your tax liability. That’s why looking at the average property tax by state for places you’re considering living will only give you a general idea of the property taxes you’ll face.

Property taxes tend to be pretty unpopular. People often feel that the property value assessment on their home is unfairly high, or that others in their area are getting off lightly. In some places, assessments are conducted regularly, while other places go decades without an assessment and people in the area would love to pay lower taxes based on a re-assessment of their home’s market value.

Many localities now use computer-based mass appraisals to adjust property tax burden. This can lead to inconsistencies that leave homeowners grumbling. Folks with fixed and/or low incomes can find themselves scrambling if their neighborhood real estate market heats up and property taxes rise.

Bottom Line

When you’re deciding whether to rent or buy, property taxes should play a role in your deliberations. Unlike mortgage payments, property taxes never go away. You may be able to get a property tax break when you’re a senior, but you should plan on property taxes being a permanent part of your budget before you take the leap into homeownership.

Tax Write-Offs or Credits for your Home

(Rentals do not qualify)

• Hurricane victim credits are available

• Mortgage interest

• Property taxes paid within that tax year

Energy Efficient Home credit  info provided by www.energystar.gov

Federal Income Tax Credits and Other Incentives for Energy Efficiency

Under the Bipartisan Budget Act of 2018 which was signed in February 2018, a number of tax credits for residential energy efficiency that had expired at the end of 2016 were renewed. Tax credits for non-business energy property are now available retroactive to purchases made through December 31, 2017.  Tax credits for all residential renewable energy products have been extended through December 31, 2021, and feature a gradual step down in the credit value. Products eligible for the tax credits that have earned the ENERGY STAR are independently certified to save energy, save money and protect the environment. Use up to 30% less energy in your home by outfitting with ENERGY STAR certified products available across more than 70 categories.

• Geothermal Heat Pumps

• Small Wind Turbines (Residential)

• Solar Energy Systems

• Fuel Cells (Residential Fuel Cell and Microturbine System)

2017 Non-business Energy Property Tax Credits
Residential Energy Property Costs:

• Air Source Heat Pumps

• Central Air Conditioning (CAC)

• Gas, Propane, or Oil Hot Water Boiler

• Gas, Propane or Oil Furnaces and Fans

• Water Heaters (non-solar)

• Advanced Main Air Circulating Fan

• Biomass Stoves

Qualified Energy Efficiency Improvements:

Please note: Tax credit DOES NOT INCLUDE INSTALLATION FOR THE FOLLOWING PRODUCTS.

• Insulation

• Roofs (Metal & Asphalt)

• Windows, Doors & Skylights