What are the advantages of owning a home?
There are many. Among the most appealing: you own it, which gives you, instead of a landlord, control of your living space. Other benefits stem from potential tax savings and the build up of equity as your property likely appreciates in price over time. Equity can be used to help put children through college, purchase a second home, or make home improvements.
The mortgage interest paid on a home loan is tax deductible, as is the local property tax. If you get a fixed-rate home mortgage loan, you also can invest more wisely knowing your monthly mortgage payment, unlike rent, will not change substantially.
What is the first step to buying a home?
Make sure you are ready – psychologically and financially. Ask yourself the following questions: Do I have steady income? Is my debt lower than my total income? Do I have enough money to pay for the down payment and closing costs? Am I working hard enough to improve bad credit?
A house needs constant care and attention. Also ask yourself if your budget will allow for unexpected repairs and upkeep. Once you can honestly answer “yes” to these questions, you are several steps ahead of the game and that much closer to becoming a homeowner.
How much can I afford?
The general rule of thumb is that you can buy a home that costs about two-and-one-half times your annual salary. A good REALTOR® or lender can determine how much you can afford and estimate the maximum monthly payment based on the loan amount, taxes, insurance and other expenses.
Why is location so important?
Location remains the single most important factor when choosing a home. It can make or break the value and desirability of a home, as well as future appreciation potential.
Because everyone’s preferences vary, your lifestyle will determine the best place for you to live. Some people prefer the suburbs while others thrive on downtown living. If you favor city living, find out what part of the city suits you best – a fast-paced neighborhood or one slightly more subdued. Talk with the neighbors and keenly observe such things as traffic patterns, lifestyles, and even sounds and smells. This is where a good agent can be worth their weight in gold. Experienced agents know the fine nuances between each community and, based on your lifestyle preferences, can be a great resource in terms of helping recommend areas that you may not even be aware of.
When choosing a town, take property taxes, schools, accessibility to work, services, recreation, and the character of the community into consideration.
Is it best to save for the ultimate dream home or begin with a less expensive starter home?
It can take a long time to save for that perfect dream home. Meanwhile, the market has been flooded with some of the most favorable mortgage interest rates in years. Low rates make housing more affordable, which is why so many buyers have jumped on the home buying bandwagon.
Home-price appreciation has also been strong, making very solid gains in communities across the country. In fact, home prices are expected to increase 2.5 percent to 3 percent annually over the next five years.
If you purchase a starter home today, you can potentially begin to build value that can lead to the purchase of a larger, or more desirable, trade-up home in the future.
How do you decide whether to add on to an existing home or purchase a new one?
There are a few things to consider, including cost, individual needs, and what will add value down the road. Also important: your emotional attachment to the existing home. As designer and builder Philip S. Wenz, the author of Adding to a House: Planning, Design & Construction, notes, an addition is much cheaper than building a new home and can offer a “new” home without the heartache of moving.
- Can you finance the home improvement with your own cash or will you need a loan?
- How much equity is in the property? A fair amount will make it that much easier to get a loan for home improvements.
- Is it feasible to expand the current space for an addition?
- What is permissible under local zoning and building laws? Despite your deep yearning for a new sunroom or garage, you will need to know if your town or city will allow such improvements.
- Are there affordable properties for sale that would satisfy your changing housing needs?
Explore your options. Make sure your decision is one you can live with – either under the same roof or under a different one. What is the best way to find a REALTOR®?
Begin by asking someone that you know. Friends, relatives, co-workers, or neighbors who have recently purchased a home can give you a firsthand account and attest to the agent’s professional abilities. Sometimes an agent you contact will refer you to another one who works more closely with buyers and sellers in your neighborhood. Once you have a list of names, interview at least three agents and ask questions about their community knowledge, professional experience, and commitment – some agents work full time; others only work at nights and on the weekends.