Tuesday, November 19, 2013, AM | 2 Comments
A few years ago, we decided to move out from our neighborhood and go to another one with woods and more privacy in the back. We had lived in the previous home for more than 20 years and the house was all paid for. We started to look around, first just driving in the nearby newer neighborhoods. We were in no big hurry or rather I was not but for some reason, my wife was.
After a month or so, we asked a real estate agent to help us out. And in two weeks, she showed us a house that my wife just fell in love with. She said it was everything she had dreamed about (until maybe 5 years from now, the dream might change again.)
We bought the house with a mortgage. I say mortgage because our older house was all paid for and we lived in it without worrying about the monthly payment for more than ten years before we bought this newer one. It takes most people a lifetime to pay off that mortgage. We had paid mortgage in ten years. Those were the good old days.
We were a little “more experienced” as it was our second home. But for the first-time home buyer, to help you know what you want, there are some questions you need to ask yourself.
Here are some tips that will hopefully help you determine your wants and needs more closely.
Create a list of needs and wants
When shopping for a home, list the features (fireplace, fenced-in yard, new appliances, etc.) that are most important to you in deciding on which home to buy. Establishing “your criteria” early on will save time shopping for inappropriate homes and may keep you from buying a home on a whim.
Create two lists: one for your needs and another one for your wants. Try not to get the needs confused with your wants. Your needs are things that you have to have, and wants are things that wouldn’t necessarily influence your purchasing decision on a home.
Make a plan and get pre-qualified
Developing a home buying plan can help you focus on the important factors and organize the entire process. Pre-qualifying loan helps you determine the home price you can afford and presents you as a genuine prospect to the seller. A lender typically uses the 28% formula (your monthly mortgage can’t exceed 28% of your monthly income) in approving your loan. A thorough plan will save both time and money!
Research is the key to discovery
Only by reading available materials, talking to friends and experts, and spending time looking at different homes, schools, and neighborhoods will you end up with your American dream. Internet is your best friend.
Location, Location, Location
The classic rule of buying the worst house in the best neighborhood still applies. If you buy with an eye towards improvement, you can customize the home to fit your needs. Like the saying goes, “make money buying a home, not selling one,”. Stay in your home for as long as you can.
Fixed vs. Adjustable Rate Mortgage
The general rule is: If you intend to own your new home for a short term period, then get a lower interest Adjustable Rate Mortgage (ARM). For longer term, a fixed rate mortgage would make more sense.
In a Nutshell
Do research and then some more research. Have a real estate agent help you look for a home. She may be able to help you pre-qualify as well. Always go with the mantra: location, location, location. That should be your best bet.