First-Time Buyer

FIRST TIME:

How To Buy The Most Home For Your Money

You’re neither rich nor poor, and you’re ready to buy your first home. You look around. All those homes on the market! All seemingly priced out of reach!

For starters:

Cheer up. You’re not alone. With some solid real estate counseling and some help from lenders and/or sellers and others, you can not only get your toe in the door, but you can own a home too. It just takes some creativity, a few inside tips and a bit of homework.

Call or e-mail us for more information on buying your first home.

NEGOTIATE:

How To Buy Your First Home At The Price You Want

Found the first home of your dreams? Now the negotiations begin.

The agent you’re working with can guide you through the process of making a purchase offer. You’ll want to start by learning as much as you can about how much the property is worth.

Check the comparables:

Your agent has up-to-the-minute price data at hand to help you analyze any comparable properties; just ask. Although every home is unique, here’s some of what makes a home “comparable” to the one you’re considering purchasing:

Follow sales price trends
Ask about recent pricing trends in the neighborhood. Specifically, what has been the average difference between listing price and sales price for recent sales of comparable homes? What is the ratio of assessed tax value to market value?

Offer what you think the house is worth
Some asking prices have built-in padding, but others are already priced to sell. You could lose a well-priced starter home with a low-ball bid. Remember, a lower mortgage interest rate will allow you to borrow more and pay a higher price for your first home without increasing your monthly payment.

Spell out the details
Consider getting a pre-purchase appraisal and home inspection. The appraisal will give an independent valuation of the property, and the inspection will help identify any potential problems you may have overlooked. Consider including a contingency making the contract subject to a satisfactory appraisal and inspection.

Evaluate contingencies
The contract can also be contingent upon an attorney’s review, previous home sale, and acceptable mortgage loan terms, etc. Contingencies are typically used to smooth acceptance of an offer without delaying the final decision. Too many contingencies, however, weaken your bargaining position.

Know what’s important to you
Prioritize the elements of the sale on paper (“must” and “want”) and decide where you have negotiating room — what you’ll give up or accept in exchange for a concession. Items frequently negotiated include adjustments for needed or requested repairs, what personal property stays and what goes with the seller, points and closing costs, and move-in date. Knowing exactly what you want and where you are willing to bargain is your most important negotiating tool.

Put everything in the first purchase offer
If the first offer is accepted it may be too late to add anything. Include a financial statement. Do all negotiating in writing with a deadline for a response, often 48 hours. You are free to cancel an offer until it is accepted by the seller. Require that your binder or deposit be held in an escrow account with the interest credited to you.

Be patient
Negotiating could take several days. Be patient; you won’t want to rush into one of the most important purchases you’ll ever make.

We can help
If you’d like help finding your first home, please call or e-mail us. We’ll help with your home search and will give you all the important information we can provide to help you make the right offer for the right home at the right price.

TIRE KICKING:

Secret Tests To Check A Property’s Condition

If you’re considering buying a home that’s more than a few years old, there may be some hidden problems you can discover before you make a purchase offer. Although putting a professional inspection contingency in the contract will help protect you from surprises, doing your own inspection before making an offer could save you considerable time and money.

How can you tell if a property is worth buying? Here’s how to look at the big picture — for structural concerns, major repairs that are needed, appliances that have to be replaced.

Crawl The Walls:

Start going to the right when you enter the home, and keep on following to the right. You will check each wall that way. Do the same on every floor. Look for settlement cracks, separating joints, defective plaster or other signs of stress or damage. Check wallpapered areas for crinkling or gathering, which may mean walls are settling or shifting.

Look For Leaks
Loose or wrinkled wallpaper could indicate a water leak somewhere. Look for water stains on the ceiling and walls. You may have to look closely — bring a flashlight — in case they have been painted over or repaired.

Spend time in the bathrooms and in every area with pipes, checking for leaks and drips. Also, run the shower and basin, then flush the toilet to check water pressure. Look for cracked or loose tiles and missing grout or mildew stains on the walls or floor, which could indicate a behind-the-wall leak.

Plug Into The Electrical System
Check every electric socket or outlet. Use a plug-in night light and turn every switch on and off. Look for extension cords and multiple plugs in sockets, which could mean insufficient or poorly placed sockets. Also check every appliance to be sure it works well.

Focus On Condition
Open and close every door and window. Look and listen for squeaking, sticking, or a tendency to close on their own. Check for evidence of shifting or settling around the front stoop, chimney and walks, and places where the driveway and the fence meet the house. Also check the deck for sturdiness and look for rotted wood. Go into the garage and check the walls, floors and doors — inside and out.

Pay Attention To Pests
Look for termites and ants. Especially look along the foundation, around doors and entry points of wiring and pipes. Check the grading of the yard to be sure water runs away from the house.

If everything looks good to you and you decide to purchase the home, be sure to require a home inspection by a professional inspector before settlement. You will want a professional who will crawl into the crawl space, climb onto the roof and poke around with a flashlight in the attic. Your professional should also carefully inspect the major systems — electrical, gas, plumbing and heating/air conditioning.

You can and should insist on a written report detailing what the problems are with the home, how important each one is. You may have to consult a contractor to estimate repair costs on any problems found.

GET REAL:

Why Pay The Mortgage On Someone Else’s House?

The only one who benefits from a rent check is the landlord. Renters never see that money again, while homeowners usually profit when they sell. In addition, renters can’t use any of their rent payment as a tax deduction, like homeowners can. If you or someone you know is renting, it’s time to put that rent check to better use!

The mortgage-interest deduction is probably the best financial argument for buying your first place rather than renting. Consider this example:

If you can afford a mortgage payment of $1,000 (principal and interest only), you can buy a house for $206,980 if you put 10% down on a 30-year mortgage at 5% interest. If your payments started in January, you would pay $9,252 in interest for the first year in the home. That entire amount is deductible on your federal income tax return! Assuming you are in the 25% tax bracket, you would save $2,313 in taxes, or $193 per month. So your $1,000 payment is really only $807 when you factor in the homeowner’s tax advantage.

Can A Renter Really Afford To Buy?

The real question is whether renters can afford not to buy. The tax savings alone make the purchase of a home a wise financial decision. But let’s go a step further.

Using the same example, a 10% down payment would create an immediate equity of $20,698. Assuming the $206,980 house grows in value by just 3% a year, in five years it would be worth $239,947. The original loan amount would then be down to $171,060, yielding an equity of $68,807. In addition, remember your annual tax savings – after five years equal to $11,195. The total value of your equity and tax savings would be $80,002 after five years.

Pick A Loan
To take advantage of the financial benefits of homeownership, first-time home buyers must find out how much buying power they have. We can help. Call us for information about the whole range of mortgage options now available, including low- and no-down-payment loans, and programs that allow buyers to wrap home-improvement costs.

Plan Ahead
Although some lenders allow buyers to use up to 41% of monthly income to purchase a house, beware of becoming “house rich and cash poor.” Be sure to budget for first homeownership costs beyond the mortgage, including expenses for:

Today, first homeownership is a wonderful dream-come-true for more people than ever before. Let us help turn those dreams into a first home to be proud of.

QUALIFY:

How Much Home Can You Really Afford?

Chances are, you’ve heard it before: Start your search for your first home with a clear idea of how much you can afford to spend. But how do you figure that out? Here are some guidelines:

Guidelines To Consider?

Buyer’s Planning Guide

The table below shows how much 28% is at various income levels.

We’re experts at putting people together with homes they love and can afford. Call or e-mail us today to see how you can get started.