Purchasing a home on a Freelance Salary

Mortgage requirements continue to tighten, but one thing remains constant; buying a home on a freelance salary continues to be more difficult than on a regular salary. The number of freelance workers is on the rise thanks to a tough job market. As a result mortgage companies are seeing a rise in this type of application. So what can you do  if your  a freelancer looking to qualify for a loan this fall?

First you can provide proof of a down payment. It doesn’t matter whether it’s a gift from a family member or account statement showing the money sitting in a 401k/savings account. The important thing is being able to prove in a verifiable way that you have the down payment ready and waiting.

Second you can prepare for a tougher review of your application. Gather your tax returns from the past 3 years. If your income had a big jump in the past year be prepared to answer questions on why. When you work on a freelance basis one of the most important things your application can show is that your income is on the rise. They want to see that you’ve had steady income bumps over consecutive years.

Third be prepared to seek out local banks. Local banks are often willing to go beyond what’s on application itself and look at the person applying for the loan. Local banks are the go to place when new developments need financing, because they are willing to look beyond typical lending restrictions.

Getting a loan on a freelance income isn’t impossible but it’s important to remember the three points above in order make the process easier. If you have more question on home loans or qualifications be please be sure to contact Pat Tobin at pwtobin@metlife.com .

What’s happening in Back Bay Sales

Two weeks ago I told everyone the  fall buying season had begun, and now it’s time to see how we’re  doing. In the past two weeks 10 condos sold and 17 were put under agreement in Back Bay. How does this compare to last year? Let’s take a look at the numbers!

September 13-27th 2009
Total Units Sold/under agreement: 27
Average List Price: $927,352
Average Price per sq. ft.: $866
Average Days on Market: 114

September 13-27 2008
Total Units Sold/under agreement: 19
Average List Price: $1,264,200
Average Price per sq. ft.: $1,052
Average Days on Market: 86

Now on the surface you might say prices are down and headed in the wrong direction, but the devil is in the details. If you remove the 1 penthouse sale at Zero Marlborough ($8.5 million) from the data in 2008, you find the average list price is really $840,000. This changes the picture a fair amount. Yes, it maybe taking longer to sell homes now but the truth of the matter is that the average place in Back Bay is currently selling for more than it would have last year. We’ll have to wait a few more days to get the full picture of September.

Putting Your Cash to Work

Smart Money Magazine this month has done a special, on 5 ways to put your cash to work for you. Some of you may have cash from pulling out of the stock market in time or even those of you that just have cash lying around. One of the main points of the article is that real estate is one of the few industries that is expected to keep pace with inflation over next few years. There is even better news for those of you over the age 59 and ½ when it comes to putting your money to work for you.

If you’re over the age of 59 ½ and have a sizable sum in a Roth IRA you can use a “self-directed” Roth IRA to buy a investment property in cash and then take the rental income from that property tax free! The only catch is that you can’t live there, not an issue for those true investors. For many people now is a great time to get into investment properties and this is a great way to earn passive tax-free income. If you’re interested in looking at investment properties feel free to contact us at 617-449-3642.

10 Reasons Why You Should Help Your Kid Buy a House this Year

Here are the top 10 reasons to help your kid buy a home this year.

1. How else could you take advantage of the low down payment possibility that FHA offers?

One of the things that’s so great about FHA financing is that it only requires a down payment of 3.5%. This is great news for both you and your kid, incase neither one of you has a lot of extra cash on hand. Obviously, the more money you can put down the better, but it’s not necessary with this kind of financing.

2. Low fixed rates on old fashion 30-year mortgages.

Mortgage rates have climbed from their record lows a few months ago, but many remain in the mid to low 5%. Parents, do you remember what your first mortgage rate was? Rates this low make home ownership a reality for many people who are simply throwing away money by renting a place.

3. FHA financing finally has limits high enough that you can get your kid a nice starter property.

It’s important to keep in mind that this is a starter home; it doesn’t need to be Tom Brady’s Mansion. The current FHA loan limit for Suffolk County is $465,000. This means that you can look at homes for roughly up to $490,000. For those of you doing the math right now that means you give roughly a 95% offer on a $490,000 and still fall within the loan limit. In today’s real estate market, I know many sellers that would be quite happy to receive that kind of offer.

4. First Time Homebuyers Tax Credit of $8,000 is good through the end of the year.

The credit is available to those who are first time homebuyers between January 1, 2009 and December 1, 2009. The tax credit is just the beginning of the tax advantages to buying a home this year. To lower your taxes further, you can also deduct the interest you pay on your FHA loan.

5. You can gift the down payment to your kid and not pay any taxes on the money.

Parents can gift their children up to $12,000 each, without paying any taxes on the gift. The father can give $12,000 and the mother can give $12,000. This means that you can give your kids $24,000 to put towards the down payment which is well above the 3.5% minimum that’s required by FHA loans.

6. You can ask for closing costs as part of the offer!

Closing costs can sometimes be a huge expense and one that many people often forget about at first. FHA loans allow for the seller to pay up to 6% of the closing costs related to transaction. This is usually enough to cover all costs associated with the purchase of the home.

7. You can take advantage of dropping interest rates even after you’ve closed.

FHA loans have the ability to easily be re-written if rates drop. This means you never have to worry about being locked into a higher rate if interest rates ever drop down further.

8. There are plenty of properties to choose from! The current market is filled with properties that fall within FHA pricing guidelines.

A quick search of just 3 Boston neighborhoods currently show almost 200 properties that fall under the $490,000 price point. When you expand the search to include a few more neighborhoods, the number of homes increases to well over 300.

9. For recent college grads, you can use your school as a previous employer.

One of the most difficult parts of getting a mortgage for recent college grads is the 2 year work requirement. Many are just starting their careers, but with an FHA loan you can use your school to fill the 2 year work requirement.

10. Real Estate has always been a path to creating wealth, so why not start your kids early?

Every financial guru out there will tell you that the creation of long lasting wealth starts with real estate. Over a long period of time it’s one the most stable and in some cases profitable places to invest your money. My favorite quote on the matter: “Buy land, it’s the one thing they aren’t making any more of. A prime example of this is the parking space in Back Bay that recently sold for $300,000. This undeveloped 8′ x 17′ piece of land that years ago was worth nothing, has now set a record in Boston.

For more information on FHA loans or for help looking for a property that meets these guidelines, feel free to contact me via email.