Thinking about buying your first home?

Deciding to become a homeowner is probably one of the biggest decisions you will make. It's a proud and wonderful experience that shouldn't be taken lightly. Right now there are many reasons to take the step into home ownership, most notably the exceptional deals on home prices and incredibly low interest rates. There is also an end of the year deadline on the $8,000 federal tax incentive,$8,000 federal tax incentive, as well as the $1,800 Georgia tax credit. While you are considering home ownership, here are a few things to keep in mind:

1. How long do you plan to live in your new home?

If you purchase a home and get a job transfer or decide to move after only a short time, you may end up paying money in order to sell it. The value of your home may not have appreciated enough to cover the costs that you paid to buy the home and the costs that it would take you to sell your home. The length of time that it will take to cover those costs depends on various economic factors in the area of the home. ****Most parts of the country have an average of 5% appreciation per year. In this case, you should plan to stay in your home at least 3-4 years to cover buying and selling costs. If the area you buy your home in experiences an economic up turn, the length of the time to cover these costs could be shortened, and the opposite is also true.

2. How long will the home meet your needs?

What features do you require in a home to satisfy your lifestyle now? Five years from now? Depending on how long you plan to stay in your home, you'll need to ensure that the home has the amenities that you'll need. For example, a two-bedroom dwelling may be perfect for a young couple with no children. However, if they start a family, they could quickly outgrow the space. Therefore, they should consider a home with room to grow. Could the basement be turned into a den and extra bedrooms? Could the attic be turned into a master suite? Having an idea of what you'll need will help you find a home that will satisfy you for years to come.

3. Your financial health- How much can you afford?

Is now the right time financially for you to buy a home? Would you rate your financial picture as healthy? Is your credit good? To determine how much home you can afford, talk to a lender. I have a team of qualified, professional mortgage lenders who would be happy to give you an idea of how much you can comfortably afford.

4. Where the money for the transaction will come from

Typically homebuyers will need some money for a down payment and closing costs. However, with today's broad range of loan options, having a lot of money saved for a down payment is not always necessary - if you can prove that you are a good financial risk to a lender. If your credit isn't stellar but you have managed to save 10-20% for a down payment, you will still appear to be a very good financial risk to a lender..

5. The ongoing costs of home ownership

Maintenance, improvements, taxes and insurance are all costs that are added to a monthly house payment. If you buy a condominium, townhouse or in certain communities, a monthly homeowner's association fee might be required. If these additional costs are a concern, you can make choices to lower or avoid these fees. Be sure to make your realtor and your lender aware of your desire to limit these costs.

Advantages of buying a home

1. You get to write off all of the property  taxes you pay and you can write off 100% of the interest you pay on your mortgage .   So if you made $50,000 next year, but you paid $2500 in property taxes and you paid $12,000 in interest to your mortgage company, you would only be taxed on $35,500 income ($50,000-$2,500-$12,000=$25,500) 

2. You can customize/make changes to your home whenever you want (versus obtaining permission from a landlord)

3. You can build equity in your home as value appreciates (versus applying YOUR money towards your LANDLORD’S equity). Although real estate moves in cycles, sometimes up-sometimes down, over the years, real estate has showed overall appreciation.  

4. You have control over loan payment options and most times you can be in a fixed mortgage where your payment stays the same over the entire loan (versus renting where there are typical rate increases each time you renew your lease). 

5. As a homeowner, you have a sense of pride that you own something (versus renting where you have no ownership). 

Common Types of Loans

1. There are various types of loan options depending on your unique circumstances.   Conventional loans are most common. Typically, there are 3 major types of conventional loans: 95%, 90%, and 80%. If you buy a home for $100,000, then on a 95% loan you would put 5% down ($5,000), on a 90% loan, you put 10% down ($10,000), etc.  

Many people save up enough to make a down payment on their loan, but there are other options for a down payment like friends, relatives, 401(k) plans, proceeds from stock sales, or even a co-signer.

2. An option used by people who have less money for a down payment is FHA financing. FHA(Federal Housing Administration) is a federal agency that insures first mortgages, enabling lenders to loan a very high percentage of the sale price. The advantage of an FHA loan versus a conventional loan is that you can buy with a lower down payment (typically 3-5% versus the 5-20% down payment of a conventional loan).  

3. VA loans are another type. They are Government backed financing available only for service veterans, characterized by no down payment, no mortgage insurance, but with a funding fee. 

Additional Information

If you would like additional information about buying your first home contact me today. I have an array of resources that can assist you including detailed neighborhood comp and sold reports and pre-printed answers to frequently asked questions. The mortgage industry is full of terms that are foreign to many people, and I have a glossary of terms that can help you translate the mortgage language into English! I look forward to educating you through your entire home buying process.