Home ownership is the second largest financial obligation most people ever make - most are children. Home ownership has great advantages, as well as a great responsibility. Here are items to consider when taking the plunge into home ownership.
plan to stay Put
Home ownership is probably not the best choice for you if you can not commit to remaining in one place for 3-4 years. With regard to transaction costs, you May end up losing money if you sell the house within a few years. And if you happen to make money on the job, you will pay capital gains tax if you are in the house less than two years.
to clean up your credit
Take steps to ensure your credit history is as clean as possible. Before house hunting, get copies of your credit report and check the facts are accurate. Contact Experian, Equifax, or TransUnion to obtain a copy of your credit report. Fix any problems you discover by contacting the agency directly (it can take up to 3 months to resolve). Be prepared to explain any past issue a loan officer.
As a general rule of thumb, look for houses where the initial cost is more than two and a half times your annual salary. Find online tools and computers on CNNMoney.com and Quicken.com for a better understanding of your income, debts and expenses to determine what you can afford.
Do not worry about the 20 percent rule,
If you qualify, there are public and private lenders who offer low-interest mortgages that require down payments as low as 3 percent of the purchase price. For more information, check FannieMae.com or Freddiemac.com. Note: For down payments of 20 percent, you'll probably need to pay for private mortgage insurance (PMI). PMI protects the bank in case you do not pay. It is generally added to 0.5 percent of the loan amount on the mortgage payments for one year.
If you would rather pay 20 percent, you have some options. First time homebuyers can withdraw up to $ 10,000 from Individual Retirement Account (IRA) without penalty (although you have to pay tax on the amount withdrawn). You can also receive cash gifts up to $ 12,000 per year from each of your parents (without incurring gift). Another method is to withdraw money from a 401K or similar retirement plan for a personal loan.
buy a house in a good school district
This rule still applies even if you do not have children or children of school age. From the perspective of resale, a strong school districts are a priority for many home buyers. Good school districts boost property values.
Understand the points and the rate of
points (also known as the loan is "approval fee") are interest charges paid in advance when you close on your loan. They are one-time fee paid to a lender as a percentage of the loan amount (one point equals one percent of the loan amount). Generally, the more points you have the loan, the lower the interest rate should be. Points are paid on a mortgage are deductible in the year to pay them. However, if you are refinancing your home, paid for refinancing must when amortized over the life of the loan. For example, you can deduct one thirtieth of the points on your taxes each year if you get a 30-year mortgage when you refinance.
mortgage rate is the most expensive part of buying a home. With a 30-year mortgage, you'll probably pay more in interest than the price of the house. There are a fixed interest rate, locked in the monthly payment amount that remains consistent throughout the life of the loan (even if interest rates rise). If rates fall, you can refinance (although you'll pay additional closing costs). Adjustable-rate mortgage (ARM) the interest rate that rises or falls with the financial index. There are also hybrid loans that offer fixed rates for the first 5-10 years, then converts to an adjustable rate for remaining term.
Which is the better choice? It depends on what you can afford to spend each month and for how long you plan to stay in the house. It also calls into question the possibility of refinancing the loan, if rates tumble in the future. When deciding between points and rate, it is useful to determine the break-even point, or a month when you will be saved just as much in monthly payments as you spent on closing.
In order to determine this, divide the cost of the items you would pay at closing by the potential monthly savings. Also, do not forget to factor in tax depreciation, inflation and alternative investment opportunities. Consult your tax attorney, accountant or financial planner.
Seek professional guidance
Although the Internet gives buyers access to home listings, it is still wise to use an agent. Find the "exclusive buyer's agent", where "the seller" agreed fee is paid to the agent for the sale of shares kuće.Agenta this fee 50/50 with the agent represents the buyer. Agents will assist strategy during the competition and can negotiate to get the seller to pay points.
Get Pre-Approved
Getting pre-approved will put you in a better position to offer serious when you find the right house. Pre-approval is based on your income, debt and credit history (pre-qualification is based on an initial review of your finances ).
research before bidding
Before you offer, research sales prices of similar homes in the neighborhood in the last three months. If you find that the house was recently sold at 5 percent less than the asking price, think about the offer which is about 8 to 10 percent lower than what the seller asks.
Are Home Inspected
Although the lender will require a home assessment anyway (as a way of determining whether the house is worth the price you agreed to pay), you should hire your own home inspector. Find an engineer with experience in conducting research in the field house where kupuju.Inspektor home will indicate potential problems that could require costly repairs down the road.
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