Buying your first home is one of life's biggest decisions. Here's some helpful advice from the company that's helped numerous people in our communities invest in their first home.
The Benefits and Responsibilities of Home Ownership
Before you buy, it's critical to weigh the benefits and responsibilities of owning a home.
Benefits:
Pride of Ownership - It feels great to have a home of your own. It's bound to give you a new sense of stability and community.
Reduced Income Taxes - Many expenses associated with home ownership such as interest and property taxes could be tax deductible. (Consult your tax advisor for professional advice regarding taxation and deductibility.)
Profit - If your house increases in value, you will benefit if or when you sell it.
Building Equity - When you make your monthly home payment and make payments towards the principal balance, you build equity. This is part of your net worth and may allow you to secure credit for future investments or expenses.
Financial Security - As your first home appreciates in value and you build equity, you lay the foundation for a financially secure future. Eventually, you may be able to trade up to a larger home and put away money for retirement.
Responsibilities:
Initial Investment - Initial down payments may range from 2% or more of the cost of the house. You may even qualify for a $0 down payment. But the higher the initial investment, the lower the monthly home payments.
Closing Costs - Closing costs are those charges necessary to obtain financing and cover expenses associated with buying a home such as property appraisal, credit reports, attorneys' fees, etc. You may be able to get the seller to pay for all or part of the closing costs.
Monthly Costs - Your monthly mortgage payment is directly related to interest rates, the type of loan you have and the price of the home you're buying. Plus, property taxes and any required insurance. Depending on your location and type of home there may also be Home Owners Association dues and/or Condominium fees.
Maintenance - Be prepared to spend time and money on repairs and upgrades - especially if the home you're buying is old or in poor condition. It's worth it - a well-maintained home with some improvements usually increases in value.
Research - Investing in a home is an inherently risky proposition (though compared to other investments, it can be on the low end of the risk spectrum). Do sufficient research before you buy a home. And once you own one, stay abreast of current real estate trends in your town.
What's Next?
Weighed the benefits and responsibilities of home ownership and decided to buy? Read on.
Get Pre-Qualified
Contact a Mortgage Consultant to get an estimate of how much house you can afford. This should be done before you start shopping for a home. It'll let you focus on homes in your price range - and let realtors know that you're knowledgeable and ready to buy.
Find a Real Estate Professional
You could look in the paper or drive through neighborhoods, but real estate professionals are the best, most efficient way to find your dream home. They also can be a valuable advocate - assisting with negotiations and the entire home buying process.
Don't Make Any Major Financial Changes
Any new debt in the months leading up to the purchase of a home could change the amount of the loan for which you qualify. Even a change in jobs, especially from regular employee to self-employed, could change the type of home loan for which you qualify.
Home Loan Criteria
To qualify for a home mortgage, you'll need to document that you have sufficient income and credit for the home you're trying to purchase.
Income - (Also known as your "ability to repay.") You'll need to provide evidence that your income is sufficient to pay your monthly bills plus your new monthly mortgage payment.
Credit - (Also known as your "willingness to repay.") Your credit history demonstrates to a lender your willingness to pay your debts in a satisfactory and timely manner.
