First Time Homebuyer with some questions.

Dante · Joined: 06 Mar 2005 Posts: 3

Hello all! I am a first time homebuyer and am completely new to all of this. Anyhow, here is my dilemma (hopefully someone can answer this for me).

Currently I am pre-approved for a $180,000 mortgage. I've been looking for houses in that price range and, in my area (Orlando, FL), it really doesn't buy you much. Unfortunately for me I am like two years too late. The houses that cost $200,000 now would have cost me $110,000 in 2003.

So, anyway, my house search has been totally futile. However, yesterday I was able to get in on a pre-construction deal with a builder that will be making some townhouses in April. These townhomes will sell for $180,000 to $220,000 before they're ever built. But since I am registered to attend the preferred purchasers event (I am one of 36 people) I will be able to buy one at $150,000 to $190,000. So, basically, I'll gain $30,000 in equity from one day to the next (from what I understand).

Now, here's my problem. In order to reserve a house at that price I will need to put down 10% of the purchase price on that day. So I need to be able to write a check for $15,000 to $19,000. I don't have this kind of cash. The most I could come up with is $10,000.

Since I am pre-approved for my mortgage, would I be allowed to borrow this down payment money first and then take the rest of the mortgage when I move in (I was told you don't actually buy the house until it is built)? Or do I have to figure this out on my own and then re-apply for a mortgage when the house is finished a year from now? Does this type of deal sound usual for a new construction?

Any help with this matter is greatly appreciated. I really want to buy this townhouse and I can certainly afford the mortgage. It's just coming up with this initial lump sum that is providing a hurdle.

chow · Posted: Sun Mar 06, 2005 12:24 pm Post subject:

Does the builder have his own mortgage company? If so, the $10,000 might get you in the door. (so to speak) You will also have closing costs, so you will need to save that up. What mortgage company is he working with to sell these off? Most builders either have one-or ask people to go to a certain mortgage company/ or mortgage broker/banker that they do business with, just to make sure they have enough loan programs to fit the buyers needs.

He may also take the initial $10,000 hold that in escrow, and give you a certain amount of time to come up with the rest of it, if he has a firm committment from who ever "pre approved" you already. Why don't you have that originator/Loan officer call and talk to him? Remember, if you sign any contracts for the deposit-read them carefully. The builder is asking for this money because he wants serious buyers who are credit worthy, and will be able to close the loan upon completion.

Mac · Joined: 04 Feb 2005 Posts: 276 Location: Knightdale, NC

Maybe it's my inherent nature to be suspicious but something seems fishy to me.

How did you become one of only 36 "preferred purchasers"? Why only 36?

Have you done your homework on this builder? Can you talk with people in other developements this builder has developed?

I would also check with any local home builders associations, the chamber of commerce and even the BBB.

Your 10K would go a long way towards buying a fully constructed home today at existing prices even if you didn't gain a penny in equity at closing.

I'm honestly not always so pessimistic. Perhaps I have been reading to many horror stories of builders going defunct before the homes are completed.

David · Joined: 19 May 2004 Posts: 754 Location: Atlanta, GA

Do you suppose this builder may be trying to raise enough money to complete the project? Or maybe he must get a certain amount in guarantees before the investor will give him enough money to complete the project? What happens if he doesn't finish the project on time?

Mac · Joined: 04 Feb 2005 Posts: 276 Location: Knightdale, NC

David, that is entirely possible and one of the main reasons for my concern. If the housing market is as competitive as the author says, there should be no need for the builder to have pre-sales that reduce their profit.

Dante · Joined: 06 Mar 2005 Posts: 3

This is actually something that is quite common in Florida. All of the home builders will have an event that lasts for a day or two allowing people to get in on the deal at below pre-construction prices. Why they do this, I have no idea. But it's just the way things are done. I actually went to go see some houses today that are being made by Maronda Homes (a very big name builder in Central Florida) and they were selling houses for about $30,000-$40,000 less than what they will be next week. However, because I was not a part of their event I was not allowed to buy.

The preferred purchasers events are usually first-come, first-serve. I just happened to be driving past right when the billboard was being erected for those townhouses so I was able to get in on the event. There are only 36 people invited because the community will have 136 units (36 are for presale). If one of the 36 don't buy on the first day then there are backup people who will be coming on the second day. I have no idea how many people get to go on the second day.

After preferred purchasers events the builders have a lottery. So, for example, if there are 100 units available but 1,000 people are interested they will pick 100 names from a hat (literally) and those people get first dibs on buying. If something doesn't work out with any of those people they draw again to pick the replacements. It's really ridiculous.

As for the builder, Crosswinds, they are new to Central Florida. They have three communities being built but nobody has moved into any of them yet. So it may be a bit of a gamble buying something from them. Now you got me thinking.

As for projects being done on time; the market is so crazy here that the builders don't even gaurantee a completion date. They give you a guesstimate but they always tell you that it can take up to two years. It never actually does take that long but people never seem to really know when they can move into their houses until about a month beforehand. Everyone just puts up with it because getting in on a new construction is nearly impossible here.

My other option is to purchase a HUD home. It's not the most favorable solution but, being that my wife is a teacher, we're allowed to purchase HUD houses at 50% off. So, basically, if the house is $150,000 then we only pay $75,000. The only catch is that it has to be your main residence for at least three years. Although HUD houses are usually "handyman specials" (from what I've seen), we are allowed to borrow against the rest of the house value in order to make repairs. So I'd have another $75,000 with which to remodel the house.

Sorry for the long post....

EDIT: Another question. What are your thoughts on buying foreclosed homes? Is it worth it to join one of these pay sites in order to view foreclosed listings? If so, which site is best? Anything I should be wary of when looking into foreclosed houses?

Once again, thank you for any help at all.

Mac · Joined: 04 Feb 2005 Posts: 276 Location: Knightdale, NC

Go for the HUD home. 3 years is a very short time span. JMO.

liverichly · Joined: 10 Feb 2005 Posts: 199 Location: Orange County, CA

I agree with Mac, I'd buy the HUD in a heartbeat if your wife would allow it - usually they don't, buy as an expensive of HUD home as you can = more equity.

The Big Easy · Joined: 20 Jan 2005 Posts: 30

I don't know about the rest of you but when I hand over $10,000 - $20,000 of my money it goes into a title companys escrow account and I want to see their e & o insurance and their bond. NEVER give to the builder.

chow · Posted: Tue Mar 08, 2005 12:42 am Post subject:

Anything you want to know about the "teacher, cop or fireperson" loan programs, either HUD's or Conventional...Feel free to email me.

I market those, along with the rehabs people run into while shopping the foreclosures using the next door programs. I used to be a cop, still have a lot of cop friends who are realtors, loan officers, appraisers-ect.

The HUD program requires you to live in a certain area-or a "target zone." The conventional program doesn't have that issue. (you don't get the 50% off, you just find a decent repo in a place YOU want to live, and bid on it like anyone else.)

Dante · Joined: 06 Mar 2005 Posts: 3

I think I am interested in looking for a regular foreclosed home for the main reason that I can choose my area. Like you said, with HUD I would have to live in a less than desirable neighborhood for 3 years.

My only questions is, how would I browse the listings for foreclosed homes? Every website I have seen requires you tp pay anywhere from $20-$70 per month to be able to view foreclosed houses. Is is something a realtor can look up for me for free or do I have to join one of these sites? If so, which is the best? With the market being the way it is I would need a website that really keeps their listings up to date.

David · Joined: 19 May 2004 Posts: 754 Location: Atlanta, GA

Here are a couple of posts that might be helpful:
http://www.mortgageforum.net/viewtopic.php?p=795#795
http://www.mortgageforum.net/viewtopic.php?p=1482#1482

Shotgunrider · Joined: 22 Mar 2005 Posts: 4 Location: Roanoke, VA

You might also contact some of the bigger players in your local mortgage market and ask for their REO (real estate owned)list. They are usually more than glad to help! :wink:

BuffaloLoans · Joined: 17 Jul 2005 Posts: 1

I would do the HUD in a drop of a dime! 50% equity for 3 years? Take that and role it into another. . . . . 3 years goes by REAL fast!

bfreeman · Joined: 06 Aug 2005 Posts: 15

Dante wrote: This is actually something that is quite common in Florida. All of the home builders will have an event that lasts for a day or two allowing people to get in on the deal at below pre-construction prices. Why they do this, I have no idea. But it's just the way things are done. I actually went to go see some houses today that are being made by Maronda Homes (a very big name builder in Central Florida) and they were selling houses for about $30,000-$40,000 less than what they will be next week. However, because I was not a part of their event I was not allowed to buy.

The preferred purchasers events are usually first-come, first-serve. I just happened to be driving past right when the billboard was being erected for those townhouses so I was able to get in on the event. There are only 36 people invited because the community will have 136 units (36 are for presale). If one of the 36 don't buy on the first day then there are backup people who will be coming on the second day. I have no idea how many people get to go on the second day.

After preferred purchasers events the builders have a lottery. So, for example, if there are 100 units available but 1,000 people are interested they will pick 100 names from a hat (literally) and those people get first dibs on buying. If something doesn't work out with any of those people they draw again to pick the replacements. It's really ridiculous.

haha i would definitely love to check out one of those... investment opportunity with a little bit of fun and excitement... how cool! :o