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First Time Homebuyer

 

Beginners Tips For Making A First Real Estate Purchase

First Time Home Buyer GuideWhen making a purchase, no matter how small or large it may be, it is important that you know pertinent details. This is true with home purchasing, you want to know all there is to know about it before beginning the process. This article is going to give you home purchasing advice.

  • Do not be discouraged if you do not find the right home for you and your family right away. Searching for a new home is a long, tedious process that some people quickly give up on. You must learn to be patient, and eventually, you will find your dream home.
  • Buy the least expensive house in the best location. Location is what holds the value of the house. A fixer-upper that is priced below market value in a great neighborhood can be remodeled into a beautiful home that can command a high price. On the other hand, the fanciest home in a mediocre location will not be sold for much more than the average price of a home in the same neighborhood.
  • When you are going into the closing for a real estate purchase or sale, it is important that you are proactive. It will make everything go a lot smoother if you have all of your necessary paperwork out of the way. Being proactive will help keep the closing process under control.
  • Researching your future property is one of the most important things you can do when purchasing real estate. You should have the property surveyed to assure that nothing is encroaching on the estate's property lines. If you buy and later discover such an issue it will be harder to remedy.
  • Determine how often you will be spending time in your vacation home, if you want to buy vacation real estate. If you are planning on renting it out, as well, calculate when you will rent and how much you are going to charge for rent. Always budget the annual cost of a vacation home and consider a different area or a smaller vacation property, if the annual costs will put you over your family budget.
  • If you are renting a house or an apartment unit, make sure to talk to your future property management or landlord about what their policies are on breaking a lease. Some places force you into signing a longer lease than you need, but you may need to relocate and break it; oftentimes, breaking the lease costs more than staying for a few more months. Make sure that you bring this topic up before you rent or sign any paperwork.
  • If you are looking for ways to come up with a down payment for your first home purchase, you can consider borrowing against your retirement accounts. You can take out up to $10,000, penalty free, from your IRA to use towards your purchase if you are a first-time home buyer.

In conclusion, learning details about whatever purchase you make is important. This is especially true for home purchasing; you want to make sure you are well informed on the subject. Enjoy your new home with peace of mind!

 

 

Follow These 3 Rules of Thumb When Buying a Home

By Forrest Baumhover

Learn more about Forrest at NerdWallet’s Ask an Advisor

The largest purchase most people will make in their lifetime is their home. It’s also the longest-lasting purchase most people will make. With that in mind, it is important that you buy a home that brings you joy instead of grief.

Too many people stretch their finances beyond the breaking point, buying a home they can’t afford and paying the price via financial strain, a decreased quality of life and even family strife. Following these basic rules of thumb can help ensure that you don’t overextend yourself in your search for the right home.

1. Avoid PMI

The first rule when buying a house is to make sure that you have enough saved for a down payment; 20% should suffice. A 20% down payment will allow a borrower with good credit to qualify for the best mortgage interest rates while avoiding private mortgage insurance (PMI).

 

PMI is required for some mortgages when a lender is afraid you might default on payments. In essence, PMI is a lender’s insurance policy that the borrower pays for. You get nothing out of it, and it costs you money. So, assuming you have good credit, having enough for a 20% down payment lets you avoid that losing game.

2. Control your PITI

The second rule is that your PITI (mortgage principal, mortgage interest, property taxes and homeowner’s insurance) should be about one-fourth of your total living expenses. For example, if your total expenses are $4,000 per month, then your PITI should be about $1,000. (And, of course, your expenses should be covered by your income, after you’ve made sure to put away money for retirement savings, emergency funds and other safeguards.)

>> MORE: NerdWallet’s Financial Guide for Homebuyers

Mortgage lenders use a so-called 28% rule when considering your application; that is, no more than 28% of your total income should go toward housing. Budgeting around one-fourth of your total expenses toward PITI should assure you’re in good shape.

3. Remember maintenance costs

It’s smart to budget approximately 1% of your house’s total cost for annual maintenance. This is just the cost of maintaining the house and grounds; it doesn’t include upgrades or planned repairs. For a $300,000 house, this comes out to $3,000 per year, or $250 per month. Although that might sound like a lot of money to put aside, you’ll be thankful it’s there when you need to fix your air conditioning or a hole in your roof.

The bottom line

Following these rules might seem difficult, particularly saving 20% for a down payment. However, if you can do that, you’ll likely be able to afford mortgage payments, especially since they’ll be taking the place of rent and adding equity to your home. Also, if you’re able to save 20% for a house, you should have no problem maintaining an emergency fund, which it’s smart to have anyway.

Many people find that with consistent effort and a little planning, they can afford a home of their own. If you’re not sure whether you can, talk to a fee-only financial planner.

This article originally appeared on NerdWallet

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