Expenses Involved in Buying a Home

If you feel that your rented home no longer meets your family's requirements, you will probably want to move into a little space of your own. But before you start looking for homes, you need to make an honest assessment of your existing financial situation. Have you got the financial capacity to afford a home?

Interest rates are at their historical lows now, so if you have got a stable income you will not have much difficulty making monthly mortgage payments. Let’s do the math.

These days, interest rates hover around 3 percent. At that rate, if you have a 30-year mortgage of $250,000, you will have to make a monthly mortgage payment of around $1000. You will probably be paying a rent of approximately the same amount each month. In this case, you can purchase a home without having to upset your monthly budget. Better still, your home is a great investment because its value will appreciate over time.

Remember that you will need to make a down payment. The lender will contribute up to 95% of the sales value of the home. You need to come up with at least 5%. You will need to consider some other expenses as well.

Energy

When you move into your own home, you will have to take care of your energy expenses. Make sure that you will have no difficulty setting aside a certain amount each month to pay your utility bills.

Notary

There is a legal fee associated with the acquisition of a property. The notary fees depend upon several factors and hence a little research is required to find out how much you will have to pay. In any case, expect to pay around $1,200.

School and municipal taxes

You will have to pay the municipal tax and school tax to the municipality every year. Some lenders set aside a certain percentage of your monthly mortgage payment to save the money required to pay these taxes on the due date. This arrangement will save you the trouble of having to come up with a bulk amount, but you should be prepared to pay a slightly higher EMI.

Renovations

Your home might require some renovations. If you are really handy, you could perhaps do these projects on your own and save some money. However, if the home requires major repairs, you will have to hire a contractor. Ask the contractor to give you a quote and plan your budget accordingly.

Mortgage insurance

If you contribute less than 20 percent of the value of the property, you will have to buy mortgage insurance. The mortgage insurance premium you pay varies between 0.5 percent and 2.90 percent of the principal amount.

Life insurance

Your lender may be ready to insure your mortgage, but that is not the best solution. Buying life insurance is a better idea because the premium payable depends on your age, health, and habits e.

Inspection

Before buying the property, you should consider getting it inspected by a professional. This is necessary to ensure that the home is in great shape. A home inspector may charge around $400.

Investors Beware: Don’t Fall for These Real Estate Blunders

At times, the real estate market appears truly hot and moves up really fast. Many people think it’s similar to a stock market, but the reality is different. For a successful real estate investment, a long-term approach is required.

Here’s a list of some common, but costly mistakes to avoid in the real estate field:

Selecting a house on the basis of current décor

Keep in mind that when you buy a home – the house is more important than the things within it. Look beyond decorative items and try to see how strong the bones are. Pay attention to things like the square footage and floor plan to figure out whether your belongings will fit appropriately.

Buying without research

Researching the neighborhood is of utmost importance before you select a property. You’re buying more than simply a house – you’re buying a piece of real estate with land around it. Find out details of the area and amenities. Also study the school system to ensure your address is in line with the appropriate school district. Try attending a community meeting if you can.

Buying without an expert inspection

Home inspection professionals can reveal many things about a property that might not be visible to you. Make sure you hire an expert with a good referral and sound experience in the field. Insist on a written report which includes photos. Photographs will help you see the condition of areas you might miss out in the normal course.

Not considering hidden costs

There’s more cost involved in buying a home than what you pay upfront. There’s a lot of spending beyond that. Find out the details regarding property taxes, water bills, and electricity bills.  You also need to consider investing in required furnishings before you move in.

Incorrect bidding at an auction

Though a starting bid for a property on auction might sound like a great deal; you can’t be sure that the same will hold true for the final price. Plan a strict budget in advance and make sure you don’t exceed this in the excitement resulting from a bidding war.

Also keep in mind that with an auctioned property, you will not get any warrantees and guarantees. You’ll not be able to get the home inspected too. Find out all associated liabilities like liens and taxes payable which might convert a good looking deal to a really bad one.

Not marketing your home correctly

When it comes to selling your home, you need to market it in different ways. Simply putting up a "for sale" board isn’t enough- you need to deploy other marketing tools too. Discuss marketing options with a real estate agent and what he can contribute.

Putting up photographs and having virtual tours online is a good idea. Include floor plans as well. These enable buyers to see the complete layout of a home and decide if it’s suitable for them.

Not getting an agent

It's important to have an expert at your side who understands all complexities. You cannot get included in the multiple listing service (MLS) without hiring an agent. Because of this, other agents will not know that you’ve put your property up for sale. Also, when prospective buyers come, you’ll have to show them around yourself.

Home buying guide – 5 Essential Tips

Buying a house is once-in-a-lifetime investment. Make sure you make the right decision. Follow this simple home buying guide to get yourself the best deal.

(1) Get yourself an agent

I do not personally like agents. Their fees inflate house prices. Houses are already expensive- add to them the agent fee and you have an overblown budget. Despite my personal feelings, I know how important it is to hire an agent when you are going to buy your first house. Agents can navigate you through the legal mumbo-jumbo and help you find your first home through their local area expertise. Since they have the connections, they can make your purchase smooth and easy.

(2) Find the right home

For many Americans, a home is the most expensive thing they will purchase in their lifetime. When a person decides to buy a home, he essentially needs a place where he would like to settle down. This makes buying a home an emotional decision as well. A real estate agent will show you several homes. This wealth of choice can make your head spin even though prolonging the buying is not a wise business decision. So make sure you find the right home, and soon.

(3) Loan

Unless you have just won a million dollar lottery, or you have suddenly grown very rich, chances are that you’ll need a mortgage to pay for your first home. It makes sense to get a loan pre-approval as there are sellers who will not even consider showing you the place unless they are sure you can get a loan. The FHA sets the minimum down payment requirements. The minimum down payment for a house is less than many conventional purchases. You will have to compare several mortgages to choose the one which suits you the best. Your agent can also help you find a good mortgage.

(4) Negotiate

Some sellers ask sky high prices for their property. This is where your negotiation skills will help you. Your agent will also help you out by compiling data from similar sales which have occurred in that neighborhood for the past three months. You can also find the correct property value through an online property value report which evaluates the true value of a property. One such report can be found for free here from Neighborhood IQ. This data gives you the power to negotiate.

(5) Home inspection

In several states in the US, a home inspection is an essential part of the contract which allows the buyer to cancel the agreement if there is a fault with the house. This gives first-time home buyers a power over sellers who may try to oversell them a house with a faulty foundation or some other issue. It should be mentioned here that the discovery of a fault does not mean a seller is legally required to make repairs. The inspection only gives power to the buyer to cancel the contract. In reality, most buyers ask for repairs, and most sellers agree.

If you are ready to make your first purchase, make sure you start early- the property rates are rising and the sooner you act, the better.