Browsing Category

buy a house

5 Things Every First-Time Home Buyer Needs to Know

February 13, 2019

first-time home buyer

iStock

Here’s what every first-time home buyer needs to know to dive into house hunting with confidence—and with as few curveballs as possible. Whether it’s getting a mortgage, choosing a real estate agent, shopping for a home, or making a down payment, we lay out the must-knows of buying for the first time below.

1. How much home you can afford as a first-time home buyer

Homes cost a bundle, so odds are you’ll need a home loan, aka mortgage, to foot the bill, along with a hefty down payment. Still, the question remains: What price home can you really afford? That depends on your income and other variables, so punch your info into realtor.com®’s home affordability calculator to get a ballpark figure of the type of loan you can manage.

In general, experts recommend that your house payment (which will include your mortgage, maintenance, taxes) should not exceed 28% of your gross monthly income. So, for example, if your monthly (before-tax) income is $6,000, multiply that by 0.28 and you’ll see that you shouldn’t pay more than $1,680 a month on your home mortgage.

But online mortgage calculators give just a ballpark figure. For a more accurate assessment, head to a lender for mortgage pre-approval. This means the bank will assess your credit history, credit score, and other factors, then tell you whether you qualify for a loan, and how much you qualify for. Mortgage pre-approval also puts home sellers at ease, since they know you have the cash for a loan to back up your offer.

You can also decide if you’re going to apply for a loan through the Federal Housing Administration (FHA).

“An FHA loan is a great option for a lot of home buyers, particularly if they’re buying their first home,” says Todd Sheinin, mortgage lender and chief operating officer at New America Financial in Gaithersburg, MD.

An FHA loan will have looser qualification requirements than a traditional mortgage, but there are still certain prerequisites borrowers must meet like getting private mortgage insurance and having a minimum credit score of 500.

2. Pick the right real estate agent

You buy most things yourself—at most, sifting through a few online reviews before hitting the Buy button and making a payment. But a home? It’s not quite so easy. Buying a home requires transfer of a deed, title search, and plenty of other paperwork. Plus there’s the home itself—it may look great to you, but what if there’s a termite problem inside those walls or a nuclear waste plant being built down the block?

There’s also a whole lot of money involved. (You know, a down payment, loan, etc.)

All of which is to say, before you make a massive payment, you will want to have a trusted real estate agent by your side to explain the ins and outs of the process. Make sure to find an agent familiar with the area where you’re planning on purchasing; to her credit, the agent will have a better idea of proper expectations and realistic prices, says Mark Moffatt, an agent with McEnearney Associates in McLean, VA.

“Finding a Realtor is not hard, but finding one that is best suited for you and your purchase is a challenge,” he adds.

You can search on realtor.com/realestateagents to find agents in your area as well as information such as the number of homes sold, client reviews, and more. Make sure to interview at least a couple of agents, because once you commit, you will sign a contract barring you from working with other buyer’s agents—this ensures the agent’s hard work for you pays off.

3. Know there is no such thing as a perfect home

It’s your first home—we understand if you’ve dreamed about the ideal house and don’t want to settle for anything less. We’ve been there! But understand that real estate is about compromise. As a general rule, most buyers prioritize three main things: price, size, and location. But realistically, you can expect to achieve only two of those three things. So you may get a great deal on a huge house, but it might not be in the best neighborhood. Or you may find a nice-size house in a great neighborhood, but your down payment is a bit higher than you were hoping for. Or else you may find a home in the right neighborhood at the right price, but it’s a tiny bit, um, cozy.

Such trade-offs are par for the course. Finding a home is a lot like dating: “Perfect” can be the enemy of “good,” or even “great.” So find something you can live with, grow into, and renovate to your taste.

4. Do your homework

Once you find a home you love and make an offer that’s accepted, you may be eager to move in. But don’t be hasty. Don’t purchase a home or make any payments without doing your due diligence, and add some contingencies to your contract—which basically means you have the right to back out of the deal if something goes horribly wrong.

The most common contract contingency is the home inspection, which allows you to request a resolution for issues (e.g., a weak foundation or leaky roof) found by a professional.

Another important first-time home buyer addition: a financing contingency, which gives you the right to back out if the bank doesn’t approve your loan. If they believe you’ll have trouble making a payment, a mortgage lender will not approve your loan. A pre-approval makes the possibility of having your loan application rejected much less likely, but a pre-approval is also not a guarantee that it’ll go through.

You also might want to consider an appraisal contingency, which lets you bail if the entity who is giving you a loan values the home at less than what you offered. This will mean you will have to come up with money from your own pocket to make up the difference—a tough gamble if cash is already tight.

5. Know your tax credit options

The first-time home buyer tax credit may be no more, but there are a number of tax breaks new homeowners may not be aware of. The biggie: Mortgage interest deduction is a boon for brand-new mortgages, which are typically interest-heavy. If you purchased discount points for your mortgage, essentially pre-paying your interest, these are also deductible. Some states and municipalities may offer mortgage credit certification, which allows first-time home buyers to claim a tax credit for some of the mortgage interest paid. Check with your Realtor and local government to see if this credit applies to you.

The post 5 Things Every First-Time Home Buyer Needs to Know appeared first on Real Estate News & Insights | realtor.com®.

8 ‘Valuable’ Home Features That May Be a Big Waste of Cash

October 9, 2018

No one likes to overpay for a purchase, and this is particularly true when buying a home. After all, every square foot of space or block closer to a top school will cost you big-time!

So if you’re a thrifty soul who must make every home-buying dollar count, check out these home features that often inspire sellers to jack up their price. That’s fine if you truly want these things, but if not? You’re wasting your money.

1. A huge yard you rarely enjoy

A sprawling green lawn may have a certain curb appeal at first sight. And if you have kids or plan to spend a lot of time outdoors, it’s a fine feature to splurge on. But if you doubt anyone will be out there much, you’re just tossing money out the window.

It turns out sellers charge a premium for that patch of grass, and you’ll funnel even more money going forward on lawn maintenance (or else spend your weekends mowing, weeding, and pruning the yard).

“It could end up just costing you a lot of money to maintain, even though it’s not being enjoyed,” says Tim Bakke, director of publishing at the Plan Collective, a website that provides house plans.

2. A short commute you won’t use

If you work from home, commute at off-hours, work in the suburbs, or are retired, don’t pay extra to buy a house near mass transit, or within easy driving distance of major office areas—those are homes that regular commuters might covet, prompting sellers to charge up the wazoo.

“Homes closer to major commerce centers cost quite a bit more than homes in outlying or suburban areas,” says real estate agent Jamie Klingman at Boutiquerealtyflorida.com.

Is this an important factor to you? If not, consider a home that’s a bit farther out to save cash.

3. A top school district when you don’t have kids

A home zoned for a great public school will always command top dollar on the open market.

“And you’ll also pay for this through your taxes,” says Bakke.

However, if you don’t have (or plan to have) kids, why empty your wallet to send someone else’s child to school? Look for homes just outside the district to save on purchase price and property taxes.

4. A single-story house when you’re fine with stairs

In many locations, homes all on the same level command a higher dollar value because the boomer generation prefers them when downsizing, says Jen Nelson, an agent in Phoenix.

If you can handle going up a flight of stairs or two, consider a two-story house to get more bang for your buck. (Another bonus? A smaller roof to replace when the time comes.)

5. A bigger house than you truly need

Very often buyers purchase a home that’s way bigger than they actually need.

“People end up with too much house and not even using the rooms they have,” says Pat Vosburgh, a certified real estate negotiation expert at Vosburghandvosburgh.com.

Since a purchase price directly reflects things like size, why overpay for bedrooms or media rooms you won’t use—and have to heat, cool, furnish, and clean? Instead, protect your bank account by looking only for homes that reflect how much space you’ll actually use.

6. A hot neighborhood

A hip neighborhood that everyone’s buzzing about can send home prices soaring. But getting caught up in the hype and overspending in an area where prices haven’t quite gelled yet can be a risky proposition where you end up (you guessed it) overpaying. Buy homes only in new areas that are still a relative bargain.

7. Fancy amenities you won’t use

Here’s a reality check: If you don’t drink wine regularly, you don’t need a wine refrigerator—or to pay for a house with one, either.

“A six-car, air-conditioned garage or a built-in commercial pizza oven may appeal to a specific buyer,” says Bruce Ailion of Atlanta’s Re/Max Town and Country. But such premium upgrades and add-ons will send a purchase price north, so you’d better make sure you use whatever you buy, often.

This is especially true when you buy a condo or a home in a planned community, since you’ll have to consider the monthly condo or HOA fees you’ll be paying as part of your purchase price. Make no mistake, those fees are for amenities—think a gym or lounge—so if you don’t plan to take advantage of these features, you’re squandering your money.

8. The nicest house in the neighborhood

It may be tempting to snag the home with the biggest price tag in a certain ZIP code for bragging rights. “But you never want to buy the most expensive home in the neighborhood,” says Vosburgh.

While it might be fun to know your casa is the area’s castle, having the top comp in a neighborhood may become an issue when it comes time to sell. This scenario leaves little room for your home’s price to appreciate, so you may not be able to recoup what you paid. So unless you’re truly smitten with this home, buyer beware.

The post 8 ‘Valuable’ Home Features That May Be a Big Waste of Cash appeared first on Real Estate News & Insights | realtor.com®.