Is It Smart To Buy A Home?
What about SAVINGS & INVESTMENTS?If you think about five percent, it may not seem like a great return, but you have to consider the context of the situation. Let’s say you put 10% down on a $200,000 home, which would be $20,000 as your initial investment. Your $200,000 home would gain $10,000 in value during the first year, earning $10,000 on an $20,000 investment, which is a whopping 50% return. If you spent $20,000 on a down payment in the stock market with a 5% return, you would only gain $1,000 in profit!
Are There TAX BENEFITS?Your property taxes as well as the interest on your mortgage are both tax deductible. You can deduct those costs from your income, thus reducing your overall taxable income. In other words, the government is subsidizing your home.
What are some OTHER BENEFITS?When you own a home, you can make the space yours in almost any way you want. And you benefit when you do home improvements, both financially and psychologically. Homes generally have more space, for storage, living, etc. than other living arrangements. Not to mention that you have space outdoors for barbecuing, pets, and kids. Owning your home carries with it a sense of pride, accomplishment, and even an elevated social status. When you’re considering buying a home, it’s important to consider the broad range of benefits that owning a home can have. Always make sure you have an experienced real estate agent and loan officer to help make sure you’re getting a home that is right for you, both financially and psychologically.
Build a Plan of Action and Get Ready
- – Convenience for all family members
- – Proximity to work, school
- – Crime rate of neighborhood
- – Local transportation
- – Types of homes in neighborhood, for example condos, town homes, co-ops, newly constructed homes etc.
Always Use A Buyer's Agent
Don't Make Any Major Credit Purchases
If you are planning to buy a home or are in the process of buying a new home, don’t go on a spending spree using credit. Your mortgage pre-approval is subject to a final evaluation of your financial situation.
Every $100 you pay per month on a credit payment could cost you about $10,000 in home eligibility. For example, a car payment of $300/month could mean that you qualify for $30,000 less in a mortgage.
You should consider not making any large purchases until after closing even if you have accumulated enough savings. The last thing you want is to know that you could have purchased a new home had you curbed the urge to spend.
HOT MARKETThis is an extremely competitive market and is advantageous to the seller. Sometimes, homes will sell as soon as they are listed or even before homes are listed. Typically, during a hot market, multiple offers will be made on each home and more often than not, homes will sell for more than the asking price. It is even more crucial to be prepared and to be ready as a buyer when the market is hot. It can be easy to get caught up in the bid for a home, but if you are prepared (pre-approved, solid in price range, realistic about your needs), it is easier to remain focused on your housing needs and price range. When the market is hot, homes will sell as soon as they are listed and sometimes before they are listed. Multiple offers can be made on each home and will typically sell for more than the asking price! As a buyer, it is critical to be prepared when the market is hot. If you’re Pre-approved, you can remain focused on your housing needs and price range and strike quickly when you find a house you want to make an offer on..
NORMAL MARKETIn a normal market, there is a healthy number of homes available and an average number of buyers. Neither the buyer or the seller is necessarily favored in a normal market. A seller may not be desperate to sell and may not have as many offers on their home. It is the buyer’s responsibility to be prepared during a normal market and unlike the hot market the chances to negotiate are higher. A buyer can expect to make offers at lower than the asking price and sometimes negotiate a price at least somewhat less than what the sellers are asking.
COLD MARKETHouses may be listed for more than a year and the list prices may drop considerably in a cold market. This market is advantageous to the buyer and gives time to make an offer that works to his or her best interest. Sellers are much more likely to be accommodating to the buyers needs and price offers. An offer still must be realistic since typically, the bottom line goal is to get your dream home at the best possible price.
Finding the Right Seller
- – They stall on having the home appraised or inspected
- – They are unable to clear up liens against their property
- – They do not own 100% of their property
- – They push back the move-out date
- – They do not have a replacement property or back up plan
Should I Consider Buying A Foreclosure?
- – Check for liens – find out if there are any liens against the property because you will be responsible for paying them
- – Know how good of a “bargain” you’re getting – foreclosures are sold “as is” and in many cases you will not be able to do a proper inspection. You may end up paying thousands of dollars repairing the property before it is fit to be lived in.
- – Do a title search – make sure that when you purchase a foreclosure that you are the only person who has any ownership claim
- – Check for a second mortgage – you don’t want to be surprised by an extra mortgage that you will need to pay
- Real Estate Owned (REO), also called “bank owned”
WHAT IS A PRE-FORECLOSURE?When you buy the home directly from a homeowner before the bank officially forecloses; it is considered a pre-foreclosure. When purchasing straight from the homeowner, you will be able to gather all the necessary information like, title information, inspection reports, etc., that you might not be able to secure with other foreclosure properties. You will be responsible for all future payments along with any overdue back payments, once you take over the mortgage.
SHOULD I BUY FROM AN AUCTION?A foreclosed property will most likely end up at a real estate auction. These auctions and their practices vary by state but commonly are held on a courthouse steps, at the county clerk’s office, or in front of the foreclosed home. Even though real estate auctions offer the best chance for a good deal, they also hold the greatest risk. There are no opportunities for buyers to perform inspections so the property is sold “as is.” The buyer must pay cash, usually a cashiers’ check at the completion of the auction sale. In the case a tenant is still living in the home, the buyer would be responsible for the costly process of eviction.
WHAT ABOUT REO’s?An REO (Real Estate Owned) is a property that has gone to auction and failed to sell. Many times, homes do not sell at auction or even get bids. Even though an REO property is the least likely of the foreclosure properties to represent a bargain, it is the least risky route. The property can be fully inspected, any title issues can be found and dealt with, and the sale can be subject to a mortgage. REO properties also tend to be in better condition than other foreclosure properties. In some states, a redemption period allows the original owner to buy back the property by paying the remaining balance owed. This is important to consider when purchasing an REO foreclosure. It is possible to have this redemption period waived, so it is important to check the state laws before purchasing the property. Still interested in buying a foreclosure property? If so, always do your research before purchasing!
Why An Inspection?
Financial Stress - And How to Avoid It
- – Are the interest rates falling or rising?
- – What type of market are you in?
- – If you want to always know what your payment will be you should find a fixed mortgage rate.
- – Do you intend to resell the property?
- – Do you only need the mortgage for a short time?
- – What are your long-term goals?