7 Reasons to Own Your Own Home
- Tax breaks. The U.S. Tax Code lets you deduct the
interest you pay on your mortgage, property taxes you pay, and some of the
costs involved in buying your home.
- Gains. Between 1998 and 2002, national home prices increased at an
average of 5.4 percent annually. And while there’s no guarantee of
appreciation, a 2001 study by the NATIONAL ASSOCIATION OF REALTORSÒ found that
a typical homeowner has approximately $50,000 of unrealized gain in a
home.
- Equity. Money paid for rent is money that you’ll never see again, but
mortgage payments let you build equity ownership interest in your home.
- Savings. Building equity in your home is a ready-made savings plan. And
when you sell, you can generally take up to $250,000 ($500,000 for a
married couple) as gain without owing any federal income tax.
- Predictability. Unlike rent, your mortgage payments don’t go
up over the years so your housing costs may actually decline as you own
the home longer. However, keep in mind that property taxes and insurance
costs will rise.
- Freedom. The home is yours. You can decorate any way you want and be
able to benefit from your investment for as long as you own the home.
- Stability. Remaining in one neighborhood for several years gives you a
chance to participate in community activities, lets you and your family
establish lasting friendships, and offers your children the benefit of
educational continuity.
To calculate whether
renting or buying is the best financial option for you, use this calculator
courtesy of Ginnie Mae:
http://www.ginniemae.gov/rent_vs_buy/rent_vs_buy_calc.asp?Section=YPTH
5 Reasons You Need a REALTORÒ
- A real estate transaction is complicated. In
most cases, buying or selling a home requires disclosure forms, inspection
reports, mortgage documents, insurance policies, deeds, and multi-page
government-mandated settlement statements. A knowledgeable guide through
this complexity can help you avoid delays or costly mistakes.
- Selling or buying a home is time consuming.
Even in a strong market, homes in our area stay on the market for an
average of ____ days. And it usually takes another 60 days or so for the
transaction to close after an offer is accepted.
- Real estate has its own language. If you don’t
know a CMA from a PUD, you can understand why it’s important to work with
someone who speaks that language.
- REALTORSÒ have done it before. Most people
buy and sell only a few homes in a lifetime, usually with quite a few
years in between each purchase. And even if you’ve done it before, laws
and regulations change. That’s why having an expert on your side is
critical.
- REALTORSÒ provide objectivity. Since a home often
symbolizes family, rest, and security, not just four walls and roof,
homeselling or buying is often a very emotional undertaking. And for most
people, a home is the biggest purchase they’ll ever make. Having a
concerned, but objective, third party helps you keep focused on both the
business and emotional issues most important to you.
- REALTORSÒ are members of the NATIONAL ASSOCIATION OF
REALTORSÒ, a trade organization of more than 1 million
members nationwide. REALTORSÒ subscribe to a stringent code of ethics that
helps guarantee the highest level of service and integrity.
10
Steps to Prepare for Homeownership
1. Decide how much home you can afford. Generally, you
can afford a home equal in value to between two and three times your gross
income.
2.
Develop a wish list
of what you’d like your home to have. Then prioritize the features on your
list.
3. Select three or four neighborhoods you’d like to
live in. Consider items such as schools, recreational facilities, area
expansion plans, and safety.
4. Determine if you have enough saved to cover your
downpayment and closing costs. Closing costs, including taxes, attorney’s fee,
and transfer fees average between 2 percent and 7 percent of the home price.
5. Get your credit in order. Obtain a copy of your
credit report.
6. Determine how large a mortgage you can qualify for.
Also explore different loans options and decide what’s best for you.
7. Organize all the documentation a lender will need
to preapprove you for a loan.
8. Do research to determine if you qualify for any
special mortgage or downpayment-assistance programs.
9. Calculate the costs of homeownership, including
property taxes, insurance, maintenance, and association fees, if applicable.
10.
Find an experienced
REALTORÒ who can help you through the process.
How
Big a Mortgage Can I Afford?
Not only does owning a
home give you a haven for yourself and your family, it makes great financial
sense, too.
This calculation assumes a
28 percent income tax bracket. If your bracket is higher, your savings will be,
too.
Rent:
_________________________
Multiplier: X 1.32
Mortgage payment:
__________________
Because of tax deductions,
you can make a mortgage payment—including taxes and insurance—that
is approximately one-third larger than your current rent payment and end up
with the same amount of income.
For more help, use Fannie
Mae’s online mortgage calculators at
http://www.fanniemae.com/homebuyers/calculators/index.jhtml?p=Resources&s=Calculators
Your
Property Wish List
While your opinions on the
type of home you want to own may change during the homebuying process, use this
easy checklist to help you prioritize and make the shopping process less time
consuming.
- How close do you need to be to: (a) public
transportation _______ (b) schools _______
(c) airport _______ (d)
expressway _______ (e) neighborhood shopping _______
(f) other_______?
- What neighborhoods would you prefer?
- What school systems do you want to be near?
- What architectural style(s) of homes do you
prefer?
- Do you want a one-story or two-story house?
- How old a home would you consider?
- How much repair or renovation would you be
willing to do?
- Do you have special facilities or needs that
your home must meet?
- Do you require a fenced yard or other
amenities for your pets?
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Prioritize each of
these options into
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Must have
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Would prefer
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Yard (at least_________)
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Garage (size________)
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Patio/Deck
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Pool
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Bedrooms
(number_________)
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Bathrooms
(number_________)
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Family room
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Formal living room
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Formal dining room
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Eat-in kitchen
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Laundry room
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Basement
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Attic
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Fireplace
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Spa in bath
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Air conditioning
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Wall-to-wall carpet
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Hardwood floors
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View
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Light (windows)
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Shade
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Tips for Finding the Perfect Neighborhood
The neighborhood you
choose can have a big impact on your lifestyle—safety, available
amenities, and convenience all play their part.
- Make a list of the activities—movies,
health club, church—you engage in regularly and stores you visit
frequently. See how far you would have to travel from each neighborhood
you’re considering to engaging in your most common activities.
- Check out the school district. The Department
of Education in your town can probably provide information on test scores,
class size, percentage of students who attend college, and special
enrichment programs. If you have school-age children, also consider paying
a visit to schools in the neighborhoods you’re considering. Even if you
don’t have children, a house in a good school district will be easier to
sell in the future.
- Find out if the neighborhood is safe. Ask the
police department for neighborhood crime statistics. Consider not only the
number of crimes but also the type—burglaries, armed robberies—and
the trend of increasing or decreasing crime. Also, is crime centered in
only one part of the neighborhood, such as near a retail area?
- Determine if the neighborhood is economically
stable. Check with your local city economic development office to see if
income and property values in the neighborhood are stable or rising. What
is the percentage of homes to apartments? Apartments don’t necessarily
diminish value, but they do mean a more transient population. Do you see
vacant businesses or homes that have been for sale for months?
- See if you’ll make money. Ask a local REALTORÒ or call
the local REALTORÒ association to get information
about price appreciation trends in the neighborhood. Although past
performance is no guarantee of future results, this information may give
you a sense of how good an investment your home will be. A REALTORÒ or the
government planning agency also may be able to tell you about planned
developments or other changes in the neighborhood—like a new school
or highway—that might affect value.
- See for yourself. Once you’ve narrowed your
focus to two or three neighborhoods, go there, and walk around. Are homes
tidy and well maintained? Are streets quiet? Pick a warm day if you can
and chat with people working or playing outside. Are they friendly? Are
their children to play with your family?
Tips
on Buying in a Tight Market
Increase your chances of
getting your dream house instead of losing it to another buyer, with these easy
steps.
- Get prequalified for a mortgage. You’ll be
able to make a firm commitment to buy and make your offer more desirable
to the seller.
- Stay in close touch with your real estate
sales associate to find out first about new listings that come on the
market. And be ready to go see a house as soon as it goes on the market.
- Scout out new listings yourself. Look at
Internet sites, newspaper ads, and drive by the neighborhood frequently.
Maybe you’ll see a brand-new “for sale” sign before anyone else.
- Be ready to make a decision. Spend lots of
time in advance deciding what you must have so you won’t be unsure when
you have the chance to make an offer.
- Bid competitively. You may not want to start
out offering the absolute highest price you can afford, but don’t try to
go too low to get a deal. In a tight market, you’ll lose out.
- Keep contingencies to a minimum. Restrictions
such as needing to sell your home before you move or wanting to delay the
closing until a certain date can make your offer unappealing. In a tight
market, you’ll probably be able to sell your house rapidly. Or talk to
your lender about getting a bridge loan to cover both mortgages for a
short period.
- Don’t get caught in a buying frenzy. Just
because there’s competition doesn’t mean you should just buy anything. And
even though you want to make your offer attractive, don’t neglect
inspections that help ensure that your house is sound.
5 Common First-Time Homebuyer Mistakes
- They don’t ask enough questions of their
lender and miss out on the best deal.
- They don’t act quickly enough to make a
decision and someone else buys the house.
- They don’t find the right real estate
professional who is willing to help you through the homebuying process.
- They don’t do enough to make their offer look
good to a seller.
- They don’t think about resale before they buy. The average first-time buyer only
stays in a home for four years.
Reprinted with
permission from Real Estate Checklists and Systems (www.realestatechecklists.com)
10 Tips
for First-Time Homebuyers
1.
Be picky, but don’t
be unrealistic. There is no
perfect home.
2.
Do your homework
before you start looking. Decide
specifically what features you want in a home and which are most important to
you.
3.
Get your finances
in order. Review your credit
report and be sure you have enough money to cover your downpayment and your
closing costs.
4.
Don’t wait to get
a loan. Talk to a lender and get
prequalified for a mortgage before you start looking.
5.
Don’t ask too many
people for opinions. It will drive
you crazy. Select one or two people to turn to if you feel you need a second
opinion.
6.
Decide when you
could move. When is your lease up?
Are you allowed to sublet? How tight is the rental market in your area?
7.
Think long-term. Are you looking for a starter house with the idea
of moving up in a few years or do you hope to stay in this home longer? This
decision may dictate what type of home you’ll buy as well as the type of
mortgage terms that suit you best.
8.
Don’t let yourself
be “house poor”. If you max
yourself out to buy the biggest home you can afford, you’ll have no money left
for maintenance or decoration or to save money for other financial goals.
9.
Don’t be naïve. Insist on a home inspection and, if possible, get
a warranty from the seller to cover defects within one year.
10. Get help. Consider hiring a REALTORÒ as a buyer’s representative. Unlike a listing
agent, whose first duty is to the seller, a buyer’s representative is working
only for you. And often, buyer’s reps are paid out of the seller’s commission
payment.
10 Things to Take the Trauma Out of Homebuying
1.
Find a real estate
professional who’s simpatico. Homebuying is not only a big financial
commitment, but also an emotional one. It’s critical that the practitioner you
choose is both skilled and a good fit with your personality.
2.
Remember, there’s no “right”
time to buy, any more than there’s a right time to sell. If you find a home
now, don’t try to second-guess the interest rates or the housing market by
waiting. Changes don’t usually occur fast enough to make that much difference
in price, and a good home won’t stay on the market long.
3.
Don’t ask for too
many opinions. It’s natural to want reassurance for such a big decision, but
too many ideas will make it much harder to make a decision.
4.
Accept that no house
is ever perfect. Focus in on the things that are most important to you and let
the minor ones go.