Tips For Buying Your First Home
- Author Steve Gillman
- Published June 11, 2010
- Word count 623
The usual tips for buying a first home are given by those in the industry, so they tend to be somewhat self-serving. To begin with, any loan broker or real estate agent wants to believe - and wants you to believe - that everyone should buy a home. Since I am writing this in 2010, after the bubble has burst, I am sure there are many hundreds of thousands of people who now realize it is not always a good idea to buy a house. In most cities around the country, if you had rented since 2006 (the top of the market), you could now buy at a big discount. That brings us to our first important tip.
Compare to Rent
If buying costs significantly more than renting, it may be better to rent. For example, in 2006 in Tucson, Arizona, a two-bedroom house might rent for $750 per month but cost $1,250 per month to buy (mortgage payment, taxes, insurance and routine maintenance).This discrepancy was a clue to the state of the very speculative market. Had you bought such a home then, you would have spent $24,000 more than renting by now, AND the hose would be worth 30% less.
This isn’t just about prices though. Interest rates go up and down over the years, and this makes a difference in whether it makes more sense to rent or buy. A house can have the same price but cost twice as much to buy with a 13% mortgage loan (the going rate in 1984, for example) as with one at 6%. Rental rates don’t fluctuate as quickly, so it can be better to rent and wait for better interest rates.
At the moment, there are many places, like the small Colorado town where we live, where it is cheaper to buy than to rent. This is due not just to dropping prices, but also near-record low interest rates. Compare rent versus ownership fairly and see if buying your first home makes sense where you are, like it does here and now.
Buy Less Than Recommended
Again, the key players in the industry - those making the loans and those selling the houses - have a bias. The bigger the sale’s price, the more money the real estate agent and loan broker make. Don’t buy into their formulas that have you allocating 35% or 40% of your income to a housing debt. Employment is less predictable than ever, and you might have to make ends meet without a job at some point in the coming years. I recommend keeping your loan payment, taxes, and insurance to 30% or less of your after-tax income.
The exception to this guideline is when you would otherwise have to rent for more than that. If renting an apartment will take 35% of your income, and you can spend the same to buy a home, then it might make sense. On the other hand, you might also consider moving to an area where rents or home prices are lower.
Consider All Costs
When buying a first home, it is common for people to look at just the most obvious and predictable costs. In other words, when shopping one house is compared to another on the basis of just the mortgage payment, perhaps including the taxes and insurance. But there are many other factors that determine your personal expenses.
For example, if one house is ten miles further away from your job than another, you could be paying $500 more per year for gasoline, and spending an extra 150 hours per year in your car. Every house will also be a bit different in how much it costs to heat it or maintain it. Do your best to estimate all the real costs of each before buying your first home.
Copyright Steve Gillman. To see a photo of the house we bought for $17,500, get a free ebook on how to buy Cheap Homes, and a free real estate investing course, visit: http://www.HousesUnderFiftyThousand.com
Article source: https://articlebiz.comRate article
Article comments
There are no posted comments.
Related articles
- First-Time Renters in Mississauga: Essential Tips for Success
- How to Choose a Title Company: A Step-by-Step Guide for Real Estate Success
- How Architects Are Shaping Sri Lanka’s Real Estate Boom
- Directing Las Vegas Homes for Sale: How Live Better in Las Vegas Guides Buyers to Success
- Understanding the Renters' Rights Bill: Key Changes and Timeline Explained
- Costs of buying property in Spain - IMS Mortgages
- Three Easy Steps to Sell Your San Antonio House Fast!
- Discover Your Dream 55+ New Construction Home Community in the Greater Tampa Bay, Florida
- Article on Mortgage Lenders and New Homes Mortgage Helpline
- The Advantages of Utilising Professional House Removals Services
- Manilva: A Rising Star in Off-Plan Property Investments
- Comparing Removals services-in-wandsworth: Your Ultimate Guide
- Port Orange -- The Perfect Twin Sister to Daytona Beach
- RE/MAX Ace Spearheads Innovative Housing Solutions in the GTA
- Should You Waive the Home Inspection Contingency? Weighing the Risks and Benefits
- Avenir: Embracing Lifestyle and Community in Palm Beach Gardens
- Serbian Real Estate: A Tidbit for Investors
- Discovering Life in Pattaya, Thailand: An In-Depth Handbook for Expatriates
- DEBUNKING HOME REPORT MYTHS
- Don't Let a Financial Hardship Force You to List Your House
- Safe Water Starts at Home
- Don’t let Missing Insulation Lead to High Energy Bills
- Property Investors Amidst Favorable Swedish Krona Rates
- How Real Estate Professionals in Houston Go Above and Beyond for Home Sellers
- Reasons to invest in real estate in Cyprus
- Top 10 criteria to select an Insurance Claim Appraiser
- Comprehensive Home Inspection Checklist for Buyer, Seller, and Homeowner
- DEBUNKING HOME REPORT MYTHS
- North Carolina Real Estate Market: Shifting Market Dynamics on the way?
- Selling Your House in Winter: Effective Tips and Strategies for Success