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Originally published Saturday, March 21, 2009 at 12:00 AM

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First-time buyers benefit from prices, choices, tax credits

It's a good time for first-time homebuyers in the Seattle area because prices are lower, there are many homes to choose from, and there is a 10 percent tax credit. But you have to do your homework, and you'll need a lot of expert help.

Where to get help

NO DOUBT, a lender will go over which options will fit your needs, but here are a few popular first-time homebuying programs:

FHA: The Federal Housing Administration's first-time homebuyer program allows a down payment as low as 3.5 percent of the purchase price. In addition, most of the closing costs and fees can be rolled into the loan. For more information, go to www.hud.gov.

VA Guaranteed Home Loan: The Veterans Affairs program provides zero-down loans for qualified veterans and regular active-duty personnel. Only certain lenders work with VA loans, which are essentially a government "guarantee" of up to 25 percent of a home loan. Buyers will want to pay attention to some of the strings that are attached to the deal. For example, if you buy a home with a VA home loan, you must certify that you intend to "personally" live in the house. That means you're not allowed to put it up for rent until the mortgage is paid off. For more information, go to www.homeloans.va.gov.

WSHFC programs: The Washington State Housing Finance Commission offers several low-interest and low-down-payment financing programs, including the House Key, House Choice and Express Program. Borrowers are required to attend a commission-sponsored homebuyer seminar to qualify for the programs, which are geared toward low- and moderate-income first-time homebuyers.

For more information, go to www.wshfc.org.

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Before applying for a mortgage or visiting open houses, Emily Yturralde read "Home Buying for Dummies," a gift from one of her friends.

Yturralde, a C-17 pilot, said the hardest part about purchasing her first home was "going into unfamiliar territory."

"I really didn't know very much about buying a home or anything," said Yturralde, 27, who is stationed at McChord Air Force Base.

But with the help of the paperback, home-financing classes at a local bank and a real-estate agent who specializes in first-time buyers, the Texas native recently closed on a $327,000 three-bedroom, two-bathroom, newly remodeled house in the Delridge area.

"Right now is just a great time to buy a house," said Yturralde, who took advantage of a zero-down financing program offered by the U.S. Department of Veterans Affairs. "There's just so much available, and the prices and the interest rates are really, really low."

And a few days before Yturralde was scheduled to sign escrow documents, she learned that the deal had become a little sweeter: As part of the highly anticipated $787 billion federal economic-stimulus package, first-time homebuyers who purchase a home between Jan. 1 and Dec. 1, 2009, are eligible for a tax credit of 10 percent of the value of their home, up to $8,000.

The incentive is geared toward single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000.

And unlike the tax credit available to first-time homebuyers in 2008, which was a $7,500 interest-free loan to be paid back within 15 years, the 2009 program is a dollar-for-dollar benefit that doesn't have to be repaid.

It's a program real-estate professionals hope will jump start the housing market.

"I think there was a lot of hold-off until the stimulus package got released," said Ben Hoefer, an agent with John L. Scott Real Estate's University Village office. "Basically that's $8,000 free to them, depending on their income."

Besides the tax credit, a wide selection of inventory and lower prices are also bringing out buyers who couldn't have afforded entry-level homes in the Seattle area a few years ago.

King County single-family homes sold last month for a median price of $375,000, down from $429,900 in February 2008, according to the Northwest Multiple Listing Service (MLS). That's the lowest median price for the county since May 2005.

Meantime, the median price for Snohomish County single-family homes fell from $355,000 to $312,000 during the same time period, according to the MLS.

"I think 2009 is going to be the year of the first-time homebuyers," Hoefer said.

Mining for bargains

Some first-time buyers are mining for bargains in the area's plethora of short sales and foreclosures, as well. A short sale is when the house is sold for less than the outstanding mortgage.

"There are a lot of short sales out there right now," said Laurie Way, an associate broker with Coldwell Banker Bain's Lake Union in Seattle. "I have no problem showing them, but I always warn my clients that it's a very trying experience."

She recently worked with a pair of first-time homebuyers on a short sale in Tukwila. They wrote the offer of $220,000 on Jan. 14. It was immediately accepted by the seller, but the bank took more than a month to give its approval. Meantime the April foreclosure deadline loomed.

"We were a little nervous about that," Way said.

But the couple's patience paid off, and now they're planning to invest some serious sweat-equity into the older home.

"They're going to fix it up; it's definitely dated," Way said. "But $220,000 in this area? It's hard to even fathom."

Another popular shopping place for first-time buyers: Seattle's condominium market, where the median price was $257,200 in February, down 11 percent from a year earlier, according to the MLS.

Brian Cole and Amy Watson recently purchased a $400,000 townhome in Madison Valley. They used an FHA loan geared to first-time buyers, and received a $5,000 credit from the seller.

The town home was originally listed at $465,000 in September. The seller dropped the price to $415,000, and then took it off the market for about a month before listing it for $405,000.

After a few weeks of watching the activity, and deciding against the other properties they had looked at, Cole and Watson decided to make an offer on the three-bedroom unit with a view of Lake Washington, Bellevue's skyline and the Cascade Mountains.

They moved into their new home a few weeks ago.

"All in all everything went really smooth," said Cole, who is a film and video editor. "The fact that I owned a home in two months was not really what I had expected. I had these ideas that it took much longer to buy a home."

Homebuying tips

Before heading out to get your piece of the American dream, consider these steps:

Take a class: The Washington State Housing Finance Commission offers free homebuying seminars throughout the region. The five-hour classes cover everything from how to avoid predatory lending scams to the importance of home inspections, and are designed to arm potential buyers with the information they need to get through the homebuying process.

"They get a real good jolt of reality," said Dee Taylor, director of the finance commission's homeownership division. "This is the largest purchase they're probably ever going to make."

To find out about the seminars, go to www.wshfc.org.

Get prequalified: Contact your bank, credit union or a mortgage broker to run a credit report and find out how much if a home you can afford.

"You need to get preapproved," said Way. "There's no sense in trying to guess what you're looking for."

Find an agent: The easiest way to find a real-estate agent or broker is to ask friends and family members for a referral. Some real-estate offices have agents who specialize in first-time buyers, as well.

"I think they really need their own separate representation," Way said. "Somebody to really hold their hand through the process, and trust."

Check out options: There are numerous down-payment assistance programs available to first-time homebuyers. The Washington State Homeownership Center's hotline, 866-600-6466, can match first-time buyers with housing counselors who can point to resources such as neighborhood action councils and other organizations that can help.

Be your best advocate: Buying a house involves stacks of contracts and legal paperwork, and first-time homebuyers are often afraid they might lose a deal if they question the details.

But that's one of the reasons why many homeowners are struggling to stay current with their mortgages, or have ended up with short sales and foreclosures. Some didn't fully understand the concept an adjustable-rate mortgage, or were allowed to finance a home they simply couldn't afford, Taylor said.

"Don't be afraid to ask questions," she added. "And if you're not getting answers, run."

Copyright © 2009 The Seattle Times Company

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