FIRST HOME
Congratulations! You have decided to buy your first home. My goal is to educate first time home buyers. The more knowledge gained, gives confidence in the decision making process. Your first home is your first investment. Please, call or e-mail to set up an appointment. I look forward to hearing from you. Also visit my real estate blog to post or view real estate news WELCOME TO TERRELLE’S BLOG .
Courtesy of:
Terrelle Major
2200 Valleydale Road
Hoover, Alabama, 35244
Phone: (205) 249-0347
Fax: (205) 823-6679
Email: terrelle@terrellehomes.com
Thinking About Buying Your First Home
Many renters are starting to think about purchasing a home of
their own. Several factors should be considered when purchasing
a home:
HOW LONG YOU PLAN TO LIVE IN THE HOME
If you purchase a home and get a job transfer or decide to move
after only a short time, you may end up paying money in order
to sell it. The value of your home may not have appreciated
enough to cover the costs that you paid to buy the home and the
costs that it would take you to sell your home. The length of time
that it will take to cover those costs depends on various
economic factors in the area of the home. Most parts of the
country have an average of 5% appreciation per year. In this
case, you should plan to stay in your home at least 3-4 years to
cover buying and selling costs. If the area you buy your home in
experiences an economic up turn, the length of the time to cover
these costs could be shortened, and the opposite is also true.
HOW LONG THE HOME WILL MEET YOUR NEEDS
What features do you require in a home to satisfy your lifestyle
now? Five years from now? Depending on how long you plan to
stay in your home, you'll need to ensure that the home has the
amenities that you'll need. For example, a two-bedroom dwelling
may be perfect for a young couple with no children. However, if
they start a family, they could quickly outgrow the space.
Therefore, they should consider a home with room to grow.
Could the basement be turned into a den and extra bedrooms?
Could the attic be turned into a master suite? Having an idea of
what you'll need will help you find a home that will satisfy you for
years to come.
FINANCIAL HEALTH: YOUR CREDIT AND HOME
AFFORDABILITY
Is now the right time financially for you to buy a home? Would
you rate your financial picture as healthy? Is your credit good?
While you can always find a lender to lend you money, solid
lenders are more skeptical if your credit history is not good.
Generally, a couple of blemishes on a credit report will make you
a good credit risk and could qualify you for the lowest interest
rates. If you have more than a couple of blemishes on your
report, lenders like Quicken Loans may still provide you with a
loan, but you may just have to pay a higher interest rate and
fees. Some say that you should refrain from borrowing as much
as you qualify for because it is wiser not to stretch your financial
boundaries. The other school of thought says you should
stretch to buy as much home as you can afford, because with
regular pay raises and increased earning potential, the big
payment today will seem like less of a payment tomorrow. This is
a decision only you can make. Are you in a position where you
expect to make more money soon? Would you rather be
conservative and fairly certain that you can make your payment?
without stretching finances? Make sure that whatever you do, it's
within your comfort zone. To determine how much home you can
afford, talk to a lender or go online and use a "home
affordability" calculator. Good calculators will give you a range of
what you may qualify for. Then call a lender. While some may
say that the "28/36" rule applies, in today's home mortgage
market, lenders are making loans customized to a particular
person's situation. The "28/36" rule means that your monthly
housing costs can't exceed 28 percent of your income
and your total debt load can't exceed 36 percent of your total
monthly income. Depending on your assets, credit history, job
potential and other factors, lenders can push the ratios up to
40-60% or higher. While we're not advocating you purchase a
home utilizing the higher ratios, its important for you to know
your options.
FUNDS FOR THE TRANSACTION: WHERE WILL IT COME
FROM
Typically homebuyers will need some money for a down payment
and closing costs. However, with today's broad range of loan
options, having a lot of money saved for a down payment is not
always necessary - if you can prove that you are a good financial
risk to a lender. If your credit isn't stellar but you have managed
to save 10-20% for a down payment, you will still appear to be a
very good financial risk to a lender.
HOME OWNERSHIP: THE ONGOING COSTS
Maintenance, improvements, taxes and insurance are all costs
that are added to a monthly house payment. If you buy a
condominium, townhouse or in certain communities, a monthly
homeowner's association fee might be required. If these
additional costs are a concern, you can make choices to lower or
avoid these fees. Be sure to make your realtor and your lender
aware of your desire to limit these costs. If you are still unsure if
you should buy a home after making these considerations, you
may want to consult with an accountant or financial planner to
help you assess how a home purchase fits into your overall
financial goals.
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