Tips for Home Buyers

Tip #1 : Why Should You Buy?

On top of enjoying the privilege of a permanent settlement for you and your family, there are 2 significant advantages to owning a place of your own: Building equity and saving on taxes.

The difference between what you owe on your home and its value is called equity.  In the early years of a home mortgage, most of each payment will go toward the loan interest, but as time passes it will go more toward your principal balance (what you owe).  Through the years your payments will reduce this balance, thus raising your equity.  If your home increases in value, your equity will rise even more. Your equity is like a savings account and it could prove very important for future needs such as a retirement plan, or major purchases.

By law, you can deduct mortgage interest and property taxes from your U.S. Federal Income Tax and from some State Income taxes.  This results in significant tax savings, especially in the early years of a mortgage when interest payments are higher.  At some stage, you may find that tax savings alone makes it less expensive to buy than to rent.

Tip #2 : How To Find The Right Place?

There are a number of things to consider when choosing the right home and everyone’s priority is different.

Make a priority list of things important to you: neighborhood preference; single or multi-level, number of bedrooms and baths; square footage; yard size; quality of schools; age of the home ; most of all, price, because if it’s out of your budget, it can’t be considered.

Start with the most important things or features that the home must have. Then work down the list and think about what would be nice to have. This will provide a clear focus for your house hunting and facilitate the job of your real estate agent.

Tip #3: Costs of Purchasing A Home

In addition to your monthly mortgage payments, you will need money upfront for a down payment and the closing costs, plus any move related expenses and maintenance or repair costs for your home.

Your down payment is a percentage of the property value and is ranges usually from 3 to 20%, or more if you want a lower loan amount. This can vary by the type of mortgage you obtain.

Closing costs are legal and financial fees associated to your purchase. They usually range from 2 to 7% of the property value and include such things as financing fees, taxes, title insurance, pre-paid and escrow items.

Tip #4: Making An Offer

Considering everything has come together, the price is within your budget, and a home has met your demands, it’s time to make an offer.

Before anything, and according to the California Law, obtaining a loan is a contingency of the offer unless it is a cash offer. You are in a much better position if you are pre-approved by your bank before making the offer. A pre-approval letter states that your loan request has already been approved. This is distinct from being pre-qualified which does not guarantee that you will obtain the loan.

If your offer is accepted, the sale proceeds. If your offer is not accepted, the seller may counter-offer with different terms.