Buying your own home is one of the most exciting, stressful things you will ever do. So, it makes sense to spend time researching every element beforehand - not just the right property, but the financial aspects of the transaction.
This blog will share practical advice on actions all homebuyers should take before, during and after the house buying process. It will prepare you for one of the most important decisions you will ever make and ensure you are in the best financial position possible.
The best home is one that meets your needs today and in the future. In recent years, homes have made less money (or even lost money), forcing homeowners to remain in their property rather than move. It is impossible to see what the future holds, but a home that will meet your requirements for at least the next five years is a sensible buy.
Make a list of must-have and would-like-to-have features. It is good to be flexible when you are making this list, especially if you are hoping to buy in an area where there is a housing shortage. Remember that older homes are more likely to need renovation or major work.
Find out early on how much money you can borrow. Before falling in love with your dream home in your ideal neighborhood, you need to know if you can afford it. A mortgage offer will be based on your salary and and your outgoings. Be honest about your monthly expenditure. Spend time going through credit card and bank statements from the past few months. Your lender will want to carry out an affordability check, so a review of your financial health will prepare you for this. It’s surprising how much money we spend on small day-to-day purchases!
Be honest about the affordability of the mortgage your lender is prepared to offer. Some lenders will offer you a bigger mortgage than you expected. While it might be tempting to accept the extra money and buy a bigger home, this could leave you struggling financially. It is good to have some money left over at the end of the month for leisure activities, and essential to have an emergency fund for unexpected costs (see point nine). You will also have to budget for property taxes, insurance, and ongoing maintenance costs. You do not have to borrow all of the money the lender offers. Ask them to show you a range of monthly payment schedules based on different loan amounts.
Buying a home is about far more than a mortgage down payment. As you will very soon discover, the deposit for the house is just one of many expenses. You will need to pay for having the home appraised, taking out private mortgage insurance, mortgage processing fees, attorney fees, escrow fees, tax payments, title expenses, and hiring movers.
Find out whether your state has a program for first time homebuyers. New York State Home and Community Renewal (HRC) has information about the programs that assist buyers in New York State: Graduate to Homeownership Program, Homes for Veterans, RemodelNY, Achieving the Dream, Construction Incentive Program, Low Interest Rate Program. The New York City Department of Housing Preservation and Development (HPD) has a Downpayment Assistance Program for first time buyers. The State of New Jersey has worked with a number of lenders to put together a more affordable, fixed interest rate and lower mortgage down payment for first time homebuyers. Connecticut Housing Investment Fund (CHIF) also provides mortgage assistance for first time buyers. A good real estate agent will tell you about the programs that you are eligible for.
Inform yourself about tax benefits and tax deductions for first time homebuyers. There are a range of benefits and deductions for homebuyers: mortgage interest deduction, points fees deduction, property tax deduction, and residential energy credit. A financial advisor will explain these clearly.
If the house is priced just beyond your reach, try making a lower offer. You might just be lucky! First time homebuyers are often attractive for homeowners who want to sell quickly. They can move fast because they do not have to wait for their own property to sell. A good real estate agent will assist you with the negotiation process.
Keep saving! Once you have purchased your home, you can never be sure when roof tiles will need replaced, a pipe leaks, or a water heater breaks down. Regular maintenance - another ongoing expense - will help keep major costs at a minimum. An older home is more likely to need large repairs. Starting an emergency fund is a good idea.
Once you have bought your home, ignore the housing market. The only time your house price matters to you is when you come to sell it.
Be savvy when it comes to adding value to your home. Over time you might like to make major improvements to your home. If you are planning to sell it at some point, do not spend more money than you are likely to see returned. For example, if you want to add a top of the range kitchen costing $20,000, will this add the same (or more) value to your house price, given your location and size?
Buying a home - whether you are a first time buyer or an experienced homebuyer - involves the head and the heart. In order to make the best choices for you and your family, it is essential to be informed about the financial and legal aspects of the purchase. Initially, these might seem confusing, but there are many sources of reliable information:
- Your attorney
- Your real estate agent
- A financial advisor
- El Centro Hispano
- US Department of Housing and Urban Development-approved housing counselors
We have a team of experienced real estate attorneys at Cabanillas & Associates. You can book an appointment online or call 1-800-LA FIRMA (1-800-523-4762) now.