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First Time Home Ownership
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Tax breaks. The U.S. Tax
Code lets you deduct the interest you pay on your mortgage, property taxes
you pay, and some of the costs involved in buying your home.
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Gains. Between 1998 and
2002, national home prices increased at an average of 5.4 percent annually.
And while there’s no guarantee of appreciation, a 2001 study by the
NATIONAL ASSOCIATION OF REALTORSÒ
found that a typical homeowner has approximately $50,000 of unrealized gain
in a home.
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Equity. Money paid for
rent is money that you’ll never see again, but mortgage payments let you
build equity ownership interest in your home.
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Savings. Building equity
in your home is a ready-made savings plan. And when you sell, you can
generally take up to $250,000 ($500,000 for a married couple) as gain
without owing any federal income tax.
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Predictability. Unlike
rent, your mortgage payments don’t go up over the years so your housing
costs may actually decline as you own the home longer. However, keep in mind
that property taxes and insurance costs will rise.
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Freedom. The home is
yours. You can decorate any way you want and be able to benefit from your
investment for as long as you own the home.
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Stability. Remaining in
one neighborhood for several years gives you a chance to participate in
community activities, lets you and your family establish lasting
friendships, and offers your children the benefit of educational continuity.
To calculate
whether renting or buying is the best financial option for you, use this
calculator courtesy of Ginnie Mae: http://www.ginniemae.gov/rent_vs_buy/rent_vs_buy_calc.asp?Section=YPTH
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They don’t ask enough questions
of their lender and miss out on the best deal.
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They don’t act quickly enough
to make a decision and someone else buys the house.
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They don’t find the right real
estate professional who is willing to help you through the homebuying
process.
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They don’t do enough to make
their offer look good to a seller.
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They don’t think about resale before
they buy. The average first-time buyer only stays in a home for four years.
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Be picky, but don’t be
unrealistic. There is no perfect home.
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Do your homework before you
start looking. Decide specifically what features you want in a home and
which are most important to you.
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Get your finances in order.
Review your credit report and be sure you have enough money to cover your
downpayment and your closing costs.
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Don’t wait to get a loan.
Talk to a lender and get prequalified for a mortgage before you start
looking.
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Don’t ask too many people
for opinions. It will drive you crazy. Select one or two people to turn
to if you feel you need a second opinion.
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Decide when you could move.
When is your lease up? Are you allowed to sublet? How tight is the rental
market in your area?
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Think long-term. Are you
looking for a starter house with the idea of moving up in a few years or do
you hope to stay in this home longer? This decision may dictate what type of
home you’ll buy as well as the type of mortgage terms that suit you best.
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Don’t let yourself be
“house poor”. If you max yourself out to buy the biggest home you
can afford, you’ll have no money left for maintenance or decoration or to
save money for other financial goals.
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Don’t be naïve. Insist
on a home inspection and, if possible, get a warranty from the seller to
cover defects within one year.
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Get help. Consider hiring
a REALTORÒ
as a buyer’s representative. Unlike a listing agent, whose first duty is
to the seller, a buyer’s representative is working only for you. And
often, buyer’s reps are paid out of the seller’s commission payment.
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Find a real estate professional
who’s simpatico. Homebuying is not only a big financial commitment, but
also an emotional one. It’s critical that the practitioner you chose is
both skilled and a good fit with your personality.
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Remember, there’s no
“right” time to buy, any more than there’s a right time to sell. If
you find a home now, don’t try to second-guess the interest rates or the
housing market by waiting. Changes don’t usually occur fast enough to make
that much difference in price, and a good home won’t stay on the market
long.
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Don’t ask for too many
opinions. It’s natural to want reassurance for such a big decision, but
too many ideas will make it much harder to make a decision.
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Accept that no house is ever
perfect. Focus in on the things that are most important to you and let the
minor ones go.
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Don’t try to be a killer
negotiator. Negotiation is definitely a part of the real estate process, but
trying to “win” by getting an extra-low price may lose you the home you
love.
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Remember your home doesn’t
exist in a vacuum. Don’t get so caught up in the physical aspects of the
house itself—room size, kitchen—that you forget such issues as
amenities, noise level, etc., that have a big impact on what it’s like to
live in your new home.
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Don’t wait until you’ve found
a home and made an offer to get approved for a mortgage, investigate
insurance availability, and consider a schedule for moving. Presenting an
offer contingent on a lot of unresolved issues will make your bid much less
attractive to sellers.
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Factor in maintenance and repair
costs in your post-homebuying budget. Even if you buy a new home, there will
be some costs. Don’t leave yourself short and let your home deteriorate.
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Accept that a little buyer’s
remorse is inevitable and will probably pass. Buying a home, especially for
the first time, is a big commitment, but it also yields big benefits.
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Choose a home first because you
love it; then think about appreciation. While U.S. homes have appreciated an
average of 5.4 percent annually from 1998 to 2002, a home’s most important
role is as a comfortable, safe place to live.
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