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Money Lesson 8 - Buy A Home |
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1. Don't buy if you can't stay put If you can't commit to remaining in one place for at least a few years, then owning is probably not for you, at least not yet. With the transaction costs of buying and selling a home, you may end up losing money if you sell any sooner. 2. Your credit history is important Since very rare people buy a home using cash, you most likely need to get a mortgage to buy a house. To be a good rate for your mortgage, you need to have a good credit history. The higher your credit score, the better interest rate you can negotiate with the creditors. Hence, you must make sure your credit history is as clean as possible. A few months before you start house hunting, get copies of your credit report. Make sure the facts are correct, and fix any problems you discover. 3. Choose A Home Within Your Financial Affordability The rule of thumb, you can buy a home that is 2 to 3 times of your annual income. For example if your annual income is $40,000, then you can aim for a home that cost around $80,000 to $120,000. But you'll do better to use one of many calculators available online to get a better handle on how your income, debts, and expenses affect what you can afford. 4. You still can buy a home if you don’t have enough 20% of down payment For general rule, you need to put down 20% of download payment when you want to buy a home. But, if you have less than 20% of download payment, you can still buy a home because there are a variety of public and private lenders who, if you qualify, offer low-interest mortgages that require a down payment as small as 3 percent of the purchase price. 5. Factor in “Good School District” Even if you do not have children, but you may want to sell your home one day and you definite want to sell at a good price. Reason: When it comes time to sell, you will learn that strong school districts are a top priority for many home buyers, thus you will get a better price for your home. 6. Choose carefully between points and rate. You may have many options on mortgage packages; you may be offered a lower interest rate with the condition of paying portion of the interest that you pay at closing (paying additional points). The lower interest rate will save you more in the long run; thus, you could consider this option if you plan to stay in the house for a long time, say five to seven years or more. 7. Get a pre-approved mortgage before you start hunting for your home Although the rule of thumb tells you that you can buy a home cost 2 to 3 times of your annual salary. It’s better to get a pre-approved mortgage from lender on how much loan you will be approved based on your actual income, debt and credit history. 8. Know the market value of the home you going to buy Your opening bid should be based on the sales trend of similar homes in the neighborhood. So before making it, consider sales of similar homes in the last three months. If homes have recently sold at 5 percent less than the asking price, you should make a bid that's about eight to 10 percent lower than what the seller is asking. 9. Hire a home inspector Sure, your lender will require a home appraisal anyway. But that's just the bank's way of determining whether the house is worth the price you've agreed to pay. Separately, you should hire your own home inspector, preferably an engineer with experience in doing home surveys in the area where you are buying. His or her job will be to point out potential problems that could require costly repairs down the road. |
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