BUYING

7 Secrets of Buying a Home

1.  What is your price range?  Before you begin looking for a home, it’s good to get an idea of how much you can afford.  Meeting with a lender is the first crucial step, because there are many loan programs which can be tailored to fit your specific needs.  If you are not already working with a qualified, competitive mortgage lender, Buddy will be happy to refer you to one.

2.  Have you been pre-approved?  Pre-qualification is a rough estimate of how much you can afford, with no verification of the information you provide.  Pre-approval is just that -- getting your personal finances verified and mortgage actually approved prior to finding a home.  Having a pre-approval letter already in place when you first start looking can be a big advantage in your later negotiations.

3.  Do you know the benefits of equity?  Equity is the difference between the value of your home and what you still owe on it.  When you sell one home, that equity can then be used as a down payment on a new home.  If you remain in the home, this same equity can be used as collateral for a home equity loan to possibly finance home improvements, a child’s college tuition, or even a new car. 

4.  How can you hedge against inflation?     Better than a savings account, your home can appreciate to keep pace with inflation.  While some geographic areas and homes increase in value more quickly than others, real estate usually keeps pace with inflation.   However, if you remained a renter, chances are your rents would increase with inflation but you wouldn’t have anything to show for your dollars spent!    

5.  Do you know about that wonderful thing called a tax break?  As a homeowner, you can deduct on your income tax return both the interest and real estate tax portions of your monthly mortgage payment.  This can mean big savings to you!  For example, with a 5% down payment, a $100,000 30-year mortgage loan at 8% interest (8.15% APR) requires a monthly principal and interest payment of $733.76.  Assuming a 28% tax bracket and $150 for monthly real estate taxes, the after-tax monthly payment would effectively become only $615!  (This example is for illustration only – please consult your tax advisor regarding your own personal situation and current tax laws.)  You might find that the after-tax mortgage payment is the same as or even less than a rent payment!

 6.  Do you understand the how to build wealth?  Most investors start on the road to financial independence through home ownership.  Rent usually goes up as the cost of living increases, but principal and interest payments remain the same for the full term of a fixed-rate mortgage.   With every rent check you write, you’re helping to build equity in your landlord’s property!  Instead, that money could be going toward building equity in a home of your own. 

7.  Do you understand the emotional advantages of home ownership?  Financial independence, security, satisfaction…with all these homeownership advantages, who needs rent?  There are many financial and emotional advantages to owning your own home, including

  • Security – A feeling of security comes from home ownership and the knowledge thatyour home is a safeguard against inflation.
  • Investment – Monthly payments on your mortgage loan mean you are acquiring a major asset.  The garden you plant, the permanent improvements you make – these enhance your lifestyle as well as your investment in your home.   .
  • Safe Environment – Your family can establish roots in your own community, and your children grow up in your neighborhood and attend the schools of your choice.
  • Satisfaction – Home ownership offers special advantages that make life more enjoyable – backyard barbeques, large family gatherings during holidays, a home workshop, and a chance to enjoy your family time together in the privacy of your own home.

Please contact Emily if you have questions or need assistance with buying your next home.