Your personal guide to buying a first home
Remember, this year, the rules have changed. Here's why:
- An $8,000 dollar tax credit goes to first time home buyers
- Interest rates are very low, which means a lower mortgage for you!
- Housing prices are low, which means lower mortgage too! (don't wait forever though...the market is on the verge of a rebound, which means the housing prices are going to start going up again
Some things haven't changed:
1. You probably won't benefit from buying if you plan on moving soon.
With all of the costs associated with buying a home, you could end up losing money on the short term. It may take a couple years or longer to recover closing costs, moving costs, etc.
Study the market in your area to determine if housing prices are on the rise or on the fall. You don't want to invest in property where prices are still falling (unless you are willing to wait a while).
2. Pay off your credit debts and clear up delinquencies
Your credit score affects your mortgage rate. Work on getting your credit score up and mortgage rate down by clearing up bad debt. Start by improving your debt to income ratio. Evaluate how much available credit you have versus used credit.
3. Be conservative with how much you can afford.
A large part of the blame in the housing industry falls in the hands of the consumer. Be conservative/realistic. Make sure you'll be able to make payments easily and on time. Don't overstretch your boundaries. When you own a house, you make your own repairs, so be prepared to shell out some cash unexpectedly for broken water lines. Alternatively, if you're a handyman or woman, be prepared to save.
4. Ask the pros
If you're reading this blog, you're probably a do it yourself kind of person. When buying a house, nonsense. Ask the pros, or experienced (and trusted) real estate agents, that have been studying the market for years. They can help you find flaws that you may not notice, hidden costs, and bargaining tactics.
5. Before you start, get pre-approved.
Talk with a bank and get pre-approved. This will allow you to bid with confidence, and move quickly once you find a home.
6. Comparison shopping is a must.
Look at other houses with the same layout, allocation of rooms and sq footage. Compare. Look at houses in the same neighborhood. Compare that too.
7. Hire a professional home inspector.
Appraisal values are a bunch of malarkey. Bank appraisals are inflated, bank home inspections are a joke, and if you want to know what's wrong with your house before you buy it, go out and get a professional home inspector on your own. If you think they might be biased, go elsewhere.
Some new things to consider
1) Don't wait too long to look/buy
It takes a few days to close on a house (like 30 or more on average). If you're hoping to get an $8,000 tax credit in 2010, don't wait until the end of the year to look for a house.
2) Pay less taxes
You can't use the $8,000 tax credit as a down payment, even though it would immensely help first time buyers. The $8,000 tax credit is only good for next tax season...but there is something you can do to increase your income now! Pay less taxes. If you're going to get an $8,000 tax credit in 2010, why not set yourself up to take a bigger hit come tax season and benefit now? Consider what you need and adjust your withholdings accordingly.
