Tips for First Time Home Buyers
Here are some very important Tips for First Time Home Buyers
It is better to live in the smallest and cheapest possible house that still meets your minimal needs. It is recommended to pay a maximum of 2 times your salary for the house. The larger the house, the more the money we waste on it. Saved money if invested in stock market would give a lot more money in the long term.
Usually if your down payment is less than 20% of the house price, you will have to pay PMI [Private Mortgage Insurance]. If you take Physician Loan, you can get away with that at a slightly higher interest rate.
Location is everything. Buy house close to work place. Wasting time and money in travelling is not worth it in the long term.
The longer you live in a house, the better off financially it will be. If you plan to live for 30 yrs, 30yr loan is the best. If you plan to live for only a few years and sell, it is better to rent than buy. If you plan to live for a few years and then rent it out, buying may be a good idea.
Longer term loans have higher interest than shorter term loans.
Do not buy a house much bigger than your needs. Do not buy too large house trying to look rich. The money spent on property taxes, cleaning, lawn and snow removal services is not fun.
Paying points does reduce the APR, but not enough to justify the cost of paying for those points, or the banks wouldn’t offer it. It may work better to pay that money for points after closing towards the principle so that it may save more on interest in the long term.
If you buy a small house first, that experience will help when you buy your larger forever home later.
If you pay extra money towards principle whenever you have some extra money, your loan can be paid much earlier than 30 yrs or 15yrs whatever you have signed up for.
If you buy a house in a new development earlier in the course of their community development, you will get houses at a much better price than if you buy towards the last phase of that community development.
Tax write offs while filing taxes are helpful to just reduce the damage, but they don’t eliminate the interest that we pay on our loan.
Buying the cheapest house in the nicest community is one of the best policies.
The house we live in is a liability, not an asset.
One may say that they bought the house to make memories in their own customized house. This is very valuable even though it made them spend more than they would if they just rented.
The best way is to buy a small house in early career and save as much as possible to invest and buy a forever larger house of your choice when you are financially more sound.
30-year loan makes your monthly mortgage payments small but builds equity very slowly. Most of the mortgage payments go for interest for the first several years. However, you will have peace of mind as monthly payments are small.
15-year loan makes monthly payments slightly higher but equity builds up faster.
Don’t get your heart set on a house. There will always be another house. Don’t enter into a bidding war to buy any house. Don’t fall in love with any house before buying as you may end up paying a lot more than its actual cost.
Avoid having a pool in the backyard at all costs. They are money pits.
Having a full bath in the first floor is important if you have elders who have joint issues. Look for that option if you need that.
Fire place is good for single family house as it can help enhancing resale value. If you want to buy a townhome which you want to rent later, I would not do a fireplace.
Look for good school district. Look for any nearby highway or freeway as those can cause a lot of noise.
Make sure property taxes and HOA fees are not that high.
Do not buy house in a corner as it affects privacy and have to clean a lot of walkway in snow areas.
I would not buy a house which is situated at low level than neighboring houses in that community. It may cause basement flooding or just remove privacy depending on location and height of other houses.
Do not buy a ‘north facing house’ in high snow fall areas because if the drive way is steep, snow does not melt in this direction and can easily lead to falls.
If you have kids, having carpet in the floor where you spend most of the time can be a disaster for the carpet. We placed wood and it cost us more but better than having a dirty carpet.
Do not buy very big lots as the cost of lawn mowing adds up pretty fast.
If you are planning to buy a house in a particular area, definitely talk to a trusted friend or two who live in that community already. There are a lot of things to consider and you may not be aware of all the info.
It helps immensely to talk to the owner of the house with similar model if you planning to buy a particular model of the house. Ask them to show their house and know what all upgrades they did. Take pictures if they allow as it helps to compare the prices offered to you with what prices were given to them. This step makes the whole house buying process very easy.
If a new community is starting, you may get good deals as the builders are trying to attract home buyers. Once a community is established, you may not get good deals as prices already appreciated by that time.
Save 20% of the cost of the house if you want to avoid paying for mortgage insurance [PMI].
You can buy the cheapest house in the best community if you want to live in a good community but don’t have a lot of money. This has some negative affect as sometimes the best communities can have higher HOA fees.
If you buy a foreclosure, you’re responsible for all of the back taxes on the property while it was in the bank’s possession.
The more complicated your house is the more things need to be repaired and updated. Keep it simple.
Visit the site of the property at different times of the day to see how it is. Some houses may not have shade in the morning or evening where you want to sit and relax. West facing house has good shade in the backyard in the evening. Opposite is true for East facing houses.
Write a list of all things you want to have in your house. When you see the new house model, check if all or at least ‘almost all’ prerequisites are present in the new house.
Don’t trust a realtor just like that. Their aim is to get maximum commission. They would rather please the builder than you as they need repeated business with builder. Some realtors can be very good.
When asked to choose upgrades in your new house [if you are building], put almost all the upgrades they tell first. Then, go home and think what you really need and what you don’t. Slowly eliminate what you don’t need or what you think is costing too much. Then, go to builder agent and ask for the price again after removing the options that you do not need. Keep doing this a few times. Then, you will have a house that you really want.
The builders tend to keep the drive way as minimal as possible [but following code] to save on asphalt/road pavement but see if you can move the house a little backward to have a little longer drive way if you like longer drive way.
The whole negotiation process should take a long time if possible while building a new house so that you can offer the best price to your advantage as after all that seller agent may just want to give it to you at a discount and move on to the next one instead of starting all over with a new client. This works to a certain extent.
Most people like ‘sun room’. I would definitely recommend one. We made the sun room size bigger and it is the best thing we did.
Take your time. Don’t buy house in a hurry.
Don’t buy a house in a community just because your friends are buying. You may miss a lot of things and may not like your house later.
Talk to a few mortgage lenders and take the one who gives the best deal. You can put competition among them to get the best deal. They match others’ deals to get your business and actually can give better deal than their competitors. Use this to your advantage.
For new houses, timing of finishing basement is purely your choice-during construction vs later. There is not good answer as to when you should do it. If you do later, you will have better idea to plan it well to match your taste.
If you plan to move and rent it later, do not do too much upgrades.
House buying is a sweet experience. Enjoy it.