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 Buying a home
The American dream is not just getting into a home mortgage—it’s actually paying off the mortgage and owning your home. But too many Americans are borrowing against the equity in their home and never realizing the dream. These steps are designed to help you achieve home ownership.
- Know your boundaries
Buying a home is a major undertaking. First, make sure your credit score is high. This will save you hundreds of thousands of dollars over a 30-year mortgage. [link to credit score page] Second, you need to understand all of the costs involved in purchasing a home and operating a home. [link to side bar articles upfront costs and operating costs] Some of these costs you can control or negotiate down. Third, know how much you can comfortably pay each month on a house payment. Don’t fall into the trap of selecting a mortgage based on the belief that you will make more money in the future. As a result you may become overextended, miss the payments or borrow against your equity, and lose your home.
- Be strategic
Real estate investing is about location, location, location. This is true about home buying, too. Identify what is important to you in choosing your home. Great schools or beautiful parks or easy access to the interstate might be the reasons for selecting a location. Or your values may be the neighborhood. The clichéd but smart advice is to always buy the cheapest house in the nicest neighborhood you can afford. This places you in a desirable location with the best schools and community resources, all for a smaller monthly payment.
Keep in mind that if you’re like most Americans, you will probably move from your new home within five years. Try to imagine what the future will bring. Will you be having children, retiring, or not wanting to take care of the lawn? Is this house in a neighborhood and in a condition that will make it easy to sell in five years?
- Don’t buy another person’s problems
It pays to have a thorough, independent home inspection. You want to know everything that is wrong with the house. Beware of hiring a home inspector recommended by your purchasing agent. That inspector has a strong incentive to minimize problems with the home in order to help your agent make a sale.
If it’s not a new house, you should also ask to see copies of utility bills, look at public records (such as property tax transactions and appeals, as well as the city plat map to check the property lines), and get a good history of the house. Meet the neighbors. This is a large financial commitment that is easier to walk away from before you purchase!
Recommended web sites:
http://www.hud.gov/offices/hsg/sfh/buying/buying.cfm
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