Before You Buy Your First Home – Tips for a First-time Home Buyer
It’s not uncommon for a first-time home buyer to say to me, “Gosh, just last week I called you about buying a home and now I’m in escrow! How did this happen so fast?”
The answer is it didn’t. First-time home buyers start the search long before most even realize it. Here’s what you can expect from your home shopping experience.
Benefits for a First-Time Home Buyer
You should buy a home. That’s what you’ve been hearing from friends and family, right? So, by now you have likely already weighed the benefits and decided that home ownership was the best decision for you. That’s a major hurdle now passed. You are focused and certain. Good.
Defining Search Parameters for a First-Time Home Buyer
Almost 80% of all home searches today begin on the Internet. With just a few clicks of the mouse, home buyers can search through hundreds of online listings, view virtual tours, and sort through dozens of photographs and aerial shots of neighborhoods and homes. You’ve probably defined your goals and have a pretty good idea of the type of home and neighborhood you want. By the time you reach your real estate agent’s office, you are halfway to home ownership.
How Long Should It Take to Buy Your First Home?
In seller’s markets, often I show only one home. After all, how many homes does one family need? A few buyers will look for years, but buyers who do that aren’t motivated. A motivated buyer will find a home within two weeks. Most of my buyers find a home within two days.
Good real estate agents will listen to your wants and needs and arrange to show only those homes that fit your particular parameters. Your agent should preview homes before showing them to you as well.
How Many Homes Will a Home Buyer See?
Studies show that your memory dramatically improves after consumption of carbs and slows upon consuming sugar. So, lay off the soft drinks and have a hearty meal of carbs before venturing out to tour homes. The average number of homes that I show to a buyer in one day is seven. Any more than that, and the brain is on overload. Therefore, don’t expect to see 20 or 30 homes; although it’s physically possible to do so, you probably will not remember specific details about any of them.
The “Red Shoes” Experience for a Home Buyer
Women will relate to this. Say, you need a new pair of red shoes. You go to the mall. At the first shoe store, you find a fabulous pair of red shoes. You try them on. They fit perfectly. They are glamorous. Priced right, too. Do you buy them? Of course not! You go to every other store in the mall trying on red shoes until you are ready to drop from exhaustion. Then you return to the first store and buy those red shoes. Do not shop for a home this way. When you find the perfect home, buy it.
How a First-Time Home Buyer Can Rate Inventory
* Bring a digital camera and begin each series of photos with a close-up of the house number to identify where each group of home photos start and end.
* Take copious notes of unusual features, colors and design elements.
* Pay attention to the home’s surroundings. What is next door? Do 2-story homes tower over your single story?
* Do you like the location? Is it near a park or a power plant?
* Immediately after leaving, rate each home on a scale of 1 to 10, with 10 being the highest.
View Top Choices a Second Time Before Buying That First Home
After touring homes for a few days, you will probably instinctively know which one or two homes you would like to buy. Ask to see them again. You will see them with different eyes and notice elements that were overlooked the first go-around.
At this point, your agent should call the listing agents to find out more about the sellers’ motivation and to double-check that an offer hasn’t come in, making sure these homes are still available to purchase.
Making the Selection To Buy a Home
I’ll let you in on a little secret. I generally know which home a buyer is going to choose, and I suspect most other agents operate the same way. It’s an intuition. But I make it a practice not to steer buyers, and I insist that buyers choose the home without interference from me. It’s not my choice to make.
Real estate agents are required, however, to point out defects and should help buyers feel confident that the home selected meets the buyer’s search parameters.
By Elizabeth Weintraub, About.com Guide
ORIGINAL ARTICLE
Before You Buy a Home – Look at Eight Reasons to Buy a Home
If you’re like most first-time home buyers, you’ve probably listened to friends’, family’s and coworkers’ advice, many of whom are encouraging you to buy a home. However, you may still wonder if buying a home is the right thing to do. Relax. Having reservations is normal. The more you know about why you should buy a home, the less scary the entire process will appear to you. Here are eight good reasons why you should buy a home.
Pride of Ownership
Pride of ownership is the number one reason why people yearn to own their home. It means you can paint the walls any color you desire, turn up the volume on your CD player, attach permanent fixtures and decorate your home according to your own taste. Home ownership gives you and your family a sense of stability and security. It’s making an investment in your future.
Appreciation
Although real estate moves in cycles, sometimes up, sometimes down, over the years, real estate has consistently appreciated. The Office of Federal Housing Enterprise Oversight tracks the movements of single family home values across the country. Its House Price Index breaks down the changes by region and metropolitan area. Many people view their home investment as a hedge against inflation.
Mortgage Interest Deductions
Home ownership is a superb tax shelter and our tax rates favor homeowners. As long as your mortgage balance is smaller than the price of your home, mortgage interest is fully deductible on your tax return. Interest is the largest component of your mortgage payment.
Property Tax Deductions
IRS Publication 530 contains tax information for first-time home buyers. Real estate property taxes paid for a first home and a vacation home are fully deductible for income tax purposes. While property taxes are collected at the local level, by counties, cities and towns, the rate is capped by the state government, meaning that the local government cannot exceed the maximum. This also means that rates will vary by location, so do your research first to find the lowest rates in the state. Remember, though, that property taxes are the primary means of generating revenue for local use, with much of it going towards education, roads and often emergency services.
Some of the highest state taxes in the country are located in the Northeast, such as New Jersey, New Hampshire, New York, Connecticut and Massachusetts. Lowest rates belong to the Southern states which include Arkansas, Mississippi, West Virginia, Alabama and Louisiana. All but five states collect sales tax on purchased items. These exemptions include Alaska, Delaware, Montana, New Hampshire and Oregon. For more information on your particular state, go to the official government page found here. Most states do have property tax relief programs in place for those who are struggling to keep up.
Again, programs vary from state-to-state, so it’s worth looking into if you think you may qualify for assistance, credit or a rebate. Read the article, “State Tax – How much will I have to pay if I move to another state? for more state tax information.
Capital Gain Exclusion
As long as you have lived in your home for two of the past five years, you can exclude up to $250,000 for an individual or $500,000 for a married couple of profit from capital gains. You do not have to buy a replacement home or move up. There is no age restriction, and the “over-55” rule does not apply. You can exclude the above thresholds from taxes every 24 months, which means you could sell every two years and pocket your profit–subject to limitation–free from taxation.
Preferential Tax Treatment
If you receive more profit than the allowable exclusion upon sale of your home, that profit will be considered a capital asset as long as you owned your home for more than one year. Capital assets receive preferential tax treatment.
Morgage Reduction Builds Equity
Each month, part of your monthly payment is applied to the principal balance of your loan, which reduces your obligation. The way amortization works, the principal portion of your principal and interest payment increases slightly every month. It is lowest on your first payment and highest on your last payment. On average, each $100,000 of a mortgage will reduce in balance the first year by about $500 in principal, bringing that balance at the end of your first 12 months to $99,500.
Equity Loans
Consumers who carry credit card balances cannot deduct the interest paid, which can cost as much as 18% to 22%. Equity loan interest is often much less and it is deductible. For many home owners, it makes sense to pay off this kind of debt with a home equity loan. Consumers can borrow against a home’s equity for a variety of reasons such as home improvement, college, medical or starting a new business. Some state laws restrict home equity loans.
By Elizabeth Weintraub, About.com Guide
