— A Complete Guide For New Home Buyers —
How To Buy Your Dream Home
by Chris Brown, President, CB Investments
13 March 2017
Buying a home is not only an opportunity to live your dream, it is an opportunity to own real estate and build wealth.
Buying a Home
For most people buying a home is the most expensive purchase they will ever make in their lives. There are government programs that help people get into houses without a lot of money, but houses are still expensive. Many people believe buying their dream home is not within the realm of possibility, because of the costs associated with houses and life in general. Real estate is an incredible way to build wealth thanks to the ability to buy real estate below market value and the United States tax code. Even someone with a modest salary can buy their dream home if they make some sacrifices and plan their real estate purchases well.
Create a budget
Though you may be able to afford a home, don’t overlook the importance of creating a budget before hitting the open houses. You’ve got to consider the bigger picture picture and your financial goals. So lay out your expenses before you start shopping: list your debt, recurring bills, everything you owe on a monthly basis. Now figure your total guaranteed monthly income. Finally, subtract your expenses from your income. Whatever remains is the amount you can afford on a monthly mortgage loan payment. But don’t plan to spend that much; leave wiggle room for unexpected expenses.
Lenders focus on these 5 things: credit score, household income, job history, cash reserves, and down payment amount.
Research Loan Options
There are a wide variety of programs, particularly down payment assistance programs, that help people achieve their dream of homeownership. And contrary to popular belief, you don’t necessarily have to be low-income to quality. You have access to a wide variety of loan products that can make your home of choice more affordable. And if you’re considering a fixer-upper, you can look into financing it with a renovation loan. This will enable a home buyer to make desired improvements and have them financed into the mortgage.
Talk To A Specialist
Buying a home is not something to take lightly. You will likely live there for quite some time, so it is important not to just settle, especially if there are ways to get creative and make it work to your advantage. For example, many homebuyers blindly ask for a 30-year fixed mortgage, but other options may be better suited such as a five-, seven-, or 10-year adjustable-rate mortgage. We live in a much more transient society than we did 20 years ago, and people all too often pay for the ‘security’ of a 30-year fixed loan when, in fact, they will likely be selling or refinancing in less than 10 years. So it’s important not to just jump in and start shopping; you should talk to a real estate finance specialist first.
While house hunting, if you find a home you love and call the name on the sign, you’re dealing with the seller’s agent.
Negotiate The Price
Everything is always negotiable. You’d be surprised at what sellers and agents will compromise on. You might not get what you want, but you never know—the seller may be extremely motivated because of a move, work relocation, or divorce, for example. They may just be looking for a fair offer and would be willing to sell to you for a little less if they can close faster as a result. You’d be amazed by how many people make no effort to negotiate the price. Haggle smart.
Buy To Make Money
Most people will not be able to buy their dream home at first. It will take time and hard work to build yourself into a position to buy your dream home. You can do this by making more money, but you can also do this with real estate. With the stock market and most products you buy them at market value. But houses can be bought below market value because they are not easy to value, they may need work, or the seller may need to sell the house quickly. So consider buying a house below market value to make money.
A good way to improve your chances and avoid sizable fees or a higher down payment is to get your credit score up.
Here are some common mistakes first-time buyers make:
- Not knowing how much house you can afford.
- Spending the maximum you can afford.
- Letting the real estate agent know how much you love the house.
- Not getting preapproved.
- Failing to budget for long term repair and maintenance costs.
- Failing to budget for property taxes.
- Skipping the home inspection.
- Not considering the resale value.
- Not getting it in writing.
- Choosing the wrong mortgage product for your needs.
Buying a home is a huge investment. Before you jump into the wonderful world of homeownership make sure you are prepared. Make sure you strengthen your credit score, figure out what you can afford, save for a down payment, build a healthy savings account, get preapproved for a mortgage, and buy a home you like in a good neighborhood. Sounds like a lot of work, but if you get someone experienced on your side it doesn’t have to be difficult. Just remember that this is a financial decision, and it is important that you have a real estate finance expert on your side.