Is this your first time?

Sure, there are houses moving. But overall, the local housing market sort of looks like the real estate equivalent of a guy sitting on his couch, twiddling his thumbs. Lots of homes on the market, not a lot of people jumping to buy them.

In the past months, the market has softened, driving prices down. So why aren’t the buyers biting? Because a lot of them are saddled with their own homes they’re trying to sell. What the market needs, said a recent report by David Phillips, CEO of the Charlottesville Area Association of Realtors (CAAR), is an influx of first-time home buyers. And because we love nothing more than helping out CAAR, here’s what you need to know about buying your first home.
 
First of all, you’re not alone. Meet Shelley Murphy, director of program services for the Piedmont Housing Alliance (PHA). Murphy calls PHA “one-stop shopping” for first-time homebuyers. If the process of buying a home is as foreign to you as it is to most newbies, PHA offers a home buyers’ education class, a six-hour certificate program that you can use to access down payment assistance or help with a mortgage.

“Basically we have pre- and post-purchase counseling, which is one-on-one,” says Murphy. “At that point a client would go through the five steps of homeownership. That’s everything from coming in and understanding their credit and personal finance to what programs they qualify for.”

There are three major costs in the process of buying a home: the down payment, closing costs and prepay costs like those associated with escrow accounts. Finding the money to cover these costs can be daunting, not to mention the extra money you’re going to need now that the credit markets are magically shaping themselves into the image of Edvard Munch’s “The Scream.”

“It’s tightened up,” says Murphy. “The [credit] scores are going to have to be a little higher. And people are going to have to have some reserves, which they should anyhow.”

This might come as a surprise, but after scraping together a down payment, most first-time buyers are going to have to keep scraping, especially if they have borderline credit.

“They should have at least two or three mortgage payments in savings,” says Murphy. “We’ll ask people ‘If your car breaks down, do you have at least the equivalent of another car note to be able to repair it?’”

Thankfully, there are some ways to shore up your cash reserves. If you have a Roth IRA, you can cash out up to $10,000 tax- and penalty-free for your first home. But that assumes you’ve been socking money away. What if you need to start saving?

Then check out a Virginia Individual Development Account, a two-year program set up by the state. It’s a two-to-one match program, meaning that if your income is less than program limits, the state will match every dollar you save with $2, up to $4,000. (The program can also be used to start a business and for education.)

Finding a mortgage in these tight-credit times might be a little more tricky than usual. It’s important to know your credit score and, if possible, work to bring it up before shopping for a loan. PHA offers credit counseling to do just that. It can also help you know all your loan options, from traditional mortgages to special programs like the Sponsoring Partnerships and Revitalizing Communities program, with interest rates .5 to 1 percent less than First-time Homebuyer Program rates.

“People are still buying houses; it’s still a good time to buy,” Murphy says. “We don’t want to discourage anyone, but it’s also time to be smart too.”

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