Home Buying…Part 1

There are a lot of buyers in the market looking for their first home.  They have lots of questions.  It’s no wonder with so much to consider…how much can you afford? how much cash do you need? how quickly do you have to make a decision? what is the best strategy to negotiate? when do you get the keys?  There is a lot of pieces to the home buying puzzle!

Here’s part 1 in a series on things you need to know when buying a home.

PREPARING FOR THE HOME BUYING PROCESS:

Area?  Consider your maximum commute to work.  If it is your dream home are you willing to make a longer commute?  Research school districts.  Schools are a big consideration in this area and they have a huge impact on resale values.  However, you may get a better deal in school districts that are rated lower.  If you have children go and tour schools & talk to school administrators ahead of time.  Property taxes.  Property taxes vary greatly by county and school districts and they have a huge impact on your monthly housing payment.  Consider property taxes when looking at areas.

How much can you afford?  Most likely you will be approved for more than you are willing to pay a month.  So take a close look at your budget.  If you are looking at a $300,000 purchase with an FHA loan & a 3.5% down payment your monthly payment will be somewhere around $2,000/month.  If your current rent is $1500/mo. then each month take that difference and put aside $500 in savings.  See how comfortable you are with the $2,000 payment each month.  Many people are surprised when they carefully look at their budget that they can find an additional $200-$300/month by doing this.

How much cash do you need?  The minimum amount of cash needed for most buyers to buy a home is 3.5% of purchase price.  This is an FHA loan and the seller can contribute up to 6% of the purchase price for your closing costs.  On a $300,000 loan that amounts to $10,500.  You’ll also need cash for inspections ($350-$1200) and an appraisal (about $450).  You can also get a gift for the down payment.  There are loans with 0% down like VA and USDA but you’ll need to speak with a lender to see what the requirements are.

Tax Advantages!  (I am not a tax accountant so consult your tax accountant for actual numbers)  You can deduct your property taxes and interest on your loan from your income taxes.  So, if you are paying $4,000/year in property taxes and $900/month of interest then you can deduct $14,800/year.  If your effective tax rate is 15% then that is a tax savings of $2,220/year.  Also, the principal of the loan is being paid down every month.  Why pay your landlord’s loan when you can be paying down your own loan every month?  Stop giving your landlord all your money!  Here’s more info from turbotax on this:  Click Here

Get Preapproved.  Talk to a lender about your credit score, income and debt and they can preapprove you for a loan amount.  You are not required to use this lender for your loan.  Once you are under contract on a home you can shop around for the best rates.  You want to talk to a lender ASAP to make sure there are no issues that would prevent you from getting a loan.  If your credit scores are low you can most likely clear those up in 6-12 months by paying down debts or getting your income up.

MLS Automatic Search.  Right away I like to set buyers up on an automatic search within their criteria.  Even if you are waiting 6 months to buy it’s a great way to get to know the market and what you can get for your money.  All I need is your price range, the area, minimum amount of bedrooms and any must haves.  You will get emails as soon as a new home hits the market or if there is a price drop.  Our MLS system is the multiple list service that realtors use to market and list homes for sale.  It is the most accurate information and homes hit this about a day or two before other real estate websites (Zillow, Trulia etc…)  I do recommend setting up an account on Zillow and the homes that catch your attention you should then save them and keep an eye on them.

As a buyer’s agent I am here as your advisor.  You are the boss and make all the decisions!  I’m here to help you make smart decisions.  Stay tuned for Part 2…

Here is a great website by Freddie Mac.  There are calculators on tax savings, affordability and information on all types of mortgages.  http://www.freddiemac.com/homeownership/calculators/

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