6 Little Known First Time Buyer Facts That Can Help You Buy A Home

6 Little Known First Time Buyer Facts That Can Help You Buy A Home

The problem that a first time buyer faces isn’t their ability to meet a monthly payment. Goodness knows that you must meet this monthly obligation every 30 days already while renting. The problem is accumulating enough capital to make a down payment on something more permanent. But saving for this lump sum doesn’t have to be as difficult as you might think. Consider the following 6 important points:

1. A first time buyer can buy a home with much less down than you think.

There are some government programs (such as the first time buyer programs) to help people get into the housing market. You can qualify as a first time buyer even if your spouse has owned a home before as long as your name was not registered. Ensure your real estate agent is informed and knowledgeable in this important area and can offer programs to help you with your options.

2. You may be able to get your lender to help you with your down-payment and closing costs.

Even if you do not have enough cash for a down payment, if you are debt-free, and own an asset free and clear (such as a car), your lending institution may be able to lend you the down payment for your home by securing it against this asset.

3. You may be able to find a seller to help you buy and finance your home.

Some sellers may be willing to hold a second mortgage for you as a “seller take-back”. In this case, the seller becomes your lending institution. Instead of paying this seller a lump-sum full amount for his or her home, you would pay monthly mortgage installments.

4. You may be able to create a cash down payment without actually going into debt.

By borrowing money for certain investments to a specified level, you may be able to generate a significant tax refund for yourself that you can use as a down payment. While the money borrowed for these investments is technically a loan, the monthly amount paid can be small, and the money invested in both home and investment will be yours in the end.

5. You can buy a home even if you have problems with your credit rating.

If you can come up with more than the minimum down-payment, or can secure the loan with other equity, many lending institutions will consider you for a mortgage. Alternatively, a seller take-back mortgage could also help you in this situation.

6. You can, and should, get pre-approved for a home loan before you go looking for a home.

Pre-approval is easy, and can give you complete peace-of-mind when shopping for your home. Mortgage experts can obtain written pre-approval for you at no cost and no obligation, and it can all be done quite easily over the phone. More than just a verbal approval from your lending institution, a written pre-approval is as good as money in the bank. It entails a completed credit application and a certificate which guarantees you a mortgage to the specified level when you find the home you’re looking for.

Consider dealing only with a professional who specializes in mortgages. Enlisting their services can make the difference between obtaining a mortgage and being stuck in the renter’s rut forever. Typically, there is no cost or obligation to inquire.

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Things You Shouldn’t Do When Buying a Home

Things You Shouldn’t Do When Buying a Home

The last thing in the world you would ever want is to spend a bunch of time searching for a home, finding that perfect place and then not being approved for your mortgage. There are also many common mistakes homebuyers make that could make the process much more painful than it has to be.

We’re writing this article because we know how stressful it can be to buy a house. In order to make your process easier, we are going to cover the 9 things you shouldn’t do when buying a home.

1) Don’t overestimate your budget.

budgetEver heard the expression “House poor“? Many homebuyers overestimate what they can actually afford and end up with very little wiggle room financially. Before jumping into buying, make sure you have a realistic idea of the yearly costs involved with owning a home.

Remember, there is your mortgage, property taxes, utilities, insurance and repairs. All of this before you even think about making upgrades. Factor in all the costs and leave yourself some room.

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2) Don’t let your emotions run wild.

decisionBuying a home is one of the biggest decisions of your life. It’s normal to be excited and fall in love with a home. However, try to keep a level head. Falling in love with a home can cloud your judgement or end in disappointment. This can happen if unforeseen issues are exposed in the inspection or if someone puts in an offer before you.

If you don’t find a home…  don’t get discouraged. Home searching can be a lengthy process. It will be worth it when you find the winner.

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3) Don’t talk to sellers about plans for the house.

buyingAs much as you are excited to get in and put your personal touch on the home, it’s best to keep this to yourself. Sometimes home buyers meet and get to know the home owners. This is fine, but remember that the current owner will have an emotional attachment to the property.

It’s best not to make them feel like you’re going to come in and completely change the place. If you make conversation with the owners, just keep the conversation light.

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4) Don’t make any large purchases.

mortageWhen applying for a mortgage, every financial transaction plays a part. It is recommended that you do not make any large purchases like furniture or a car prior to applying. This is because banks want to see that you have a smooth financial history.

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5) Don’t withdraw or deposit a lot of cash.

moneyGoing further with your financial history, cash withdraws and deposits also play a part in your mortgage approval rate. Large quantities of cash going in or out of your accounts signals a warning sign that you do not have stability. Avoid any sporadic withdraws or deposits of large sums of cash.

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6) Don’t apply for more credit.

creditcardThe amount you are approved for on your mortgage comes down to your capital. How much money do you have at your disposal? Applying for extra credit increases your debt. This extra debt decreases the amount you will be approved for on a mortgage.

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7) Don’t co-sign a loan.

loanWhile a loan may not technically be yours – it will still equally count towards your overall debt. Co-signing a loan can have an impact on not only the amount of your mortgage, but approval rate in general. Avoid co-signing any loans until you have purchased your home.

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8) Don’t finance a car or furniture.

carloanAs financing is again a loan, it is therefore debt. Stay away from financing a car or furniture for the above mortgage approval reasons.

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9) Don’t switch or leave your job.

jobFinancial stability is one of the most important factors considered when a bank is approving your mortgage. The key to financial stability is having a dependable income. If you switch or leave your job, often or before applying for a mortgage, this may signal red flags.

If you are thinking about a move, hang tight with your job until after your mortgage is approved.

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In Conclusion

There are many important things to consider when purchasing a home. It is one of the biggest decisions of your life.

In order to ensure that you get the house you want, when you want it, you need to understand and follow those above tips. Doing so will increase your chances of finding that perfect home and getting it. Remember that financials are very important when it comes time to apply for a mortgage. Make that your priority.

Also keep in mind the emotional aspects of purchasing a home and try to stay cool. It can be a draining process, but it will be worth it when you get the keys to the castle!

Are you looking for a home in the (INSERT COMMUNITY) area? Give me a call. I’d love to help you find a home (and make sure you make none of the above mistakes in the process!)

Should I Rent or Buy a Home?

Should I Rent or Buy a Home?

Choosing whether to rent or own a home is not an easy decision. It requires you to carefully examine the factors and costs associated with each option. Which is better? That depends.

Your unique economic situation, lifestyle and goals play the largest part in deciding what is better for you. It’s important to go into your calculations with open eyes. As much as you want a home, you may not be able to afford it. Or it may not be the right decision for the way you like to live.

Factors To Consider When Buying/Renting a Home

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The following four points are the largest factors to consider when weighing the pros and cons of home ownership vs. rental.

1) What are the total costs?

Many people look at the economics of home-ownership as a mortgage payment only. In reality there are insurance, repairs, property tax, homeowners association dues etc. that all have to be factored in to your monthly costs. Check out this calculator from the New York Times to see more.

Use a calculator and compare to see if:

  1. The monthly cost as a homeowner is less than renting.
  2. You can afford the monthly cost (if it works out more than renting in your area)
  3. Saving a 10-20% down-payment is feasible for you.

If owning a home definitely the way to go for you, you need to be able to answer the above questions definitively.

2) What is important to you?

Are you more interested in building for the future, or reducing your financial risk until you can figure out a plan? You may want to own if you are thinking about starting a family. But as someone who is single, you may enjoy your freedom and having less financial debt. (Even if it is building your net worth in the long run)

Undoubtedly, buying a house only makes sense if you plan to set up roots. If you plan to move within (or every) 5 years, your transaction costs will likely bring the equity you build in your house to zero. Thus diminishing your upside while carrying all of the liabilities that come along with home ownership. Owning a home is a smart decision if you plan to stay for 10 years or more.

3) What is your preferred lifestyle?

Do you want to build a career in a specific city or travel around? Do you have long-term goals in mind? It’s okay if you don’t. The most important part is being aware of where you are at. You may want to get some international work experience or try your luck in another part of the country. Or not.

Really think about what you want. You could lose some serious money if you buy a house and sell within a few years because you decide it isn’t for you.

4) What are the opportunity costs?

Think about the pros and cons of home-ownership. On one hand, you will always have a home base. On the other, you have a property that ties you down to a geographical location. Can you make more money in another city? With a home, you can’t move to pursue those opportunities.

If rent is equal to monthly payments as an owner, think about the opportunity costs of having all of your money tied up in the house. For example, some investors may rent and opt to invest their money in the stock-market or other investments in their portfolio. Can you make higher percentage returns yearly with the money you would be using for a down payment?

Rent vs Buying

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The above were things you will want to consider. If you need to be realistic to make the right decision about renting vs owning a home. The below two situations may help if you aren’t able to come to a conclusion.

When is Renting a Home Better?

Despite popular belief, owning a home is not always the best decision. Let’s not be black and white. It depends on your particular situation.

You may want to rent if:

  1. You want to travel and set-up shop in different places every few years.
  2. You do not have the job or financial security to (realistically) guarantee payments for years to come.
  3. You have demonstrated the ability to make better financial returns through other investments.

There are other factors. However, this is a good starting point to help you determine your argument for renting versus owning a home. The benefit of renting is not being tied down to a geographic location and being able to leave when your lease runs up.

When is Owning a Home Better?

Owning a home is the long-term game. You need to have your goals in mind and understand if you can afford it.

You may want own if:

  1. You are okay with staying in one place for 10 years or more.
  2. You have the financial stability to afford the home (and float payments if you lose your job)
  3. You want to leverage your home as an investment property down the line (through rental)

Owning a home gives you an anchor. It helps you stay grounded by having a home base. At the same time, you can increase your upward potential by leveraging the home as an investment property.

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In Conclusion

Choosing to rent or own your home is a big decision. It depends on your individual situation and vision for the future. In short, owning is traditionally the better long-term strategy. However, that’s not to say that you can’t do as good or better with the right investment portfolio.

Before jumping into anything, analyze yourself. Think hard about where you are and what you want for the future. Speak to a realtor and see if they have any advice for your individual situation.

If you are looking at purchasing property in the area, give me a call. I’d love to discuss your options and see if buying is the right path for you.

The Future Of Real Estate Commissions

When it comes to real estate, it’s all about location. But when it comes to staging a home to sell the highest possible price, the importance of location applies to more than just the street.

The placement of your furniture and accessories can make or break a room and potentially even a sale.

Why it matter?

The look and feel of a space is created by the way the various items in that room are positioned. If you put them in the wrong place you can instantly diminish the overall appearance of the area, regardless of whether the items individually are stylish and on-trend.

Good placement, however, will have the opposite effect, to the point where even less attractive furniture located correctly around the room can produce amazing results.