Buying your first home is like realizing a dream, especially if you have been staying in a rental apartment. And no matter how exciting it may sound, only the buyer knows what goes into it. It does have you feeling euphoric but at the same time, it gets you all nervous and jittery. If you are buying a home for the first time in the US, there are a lot of things which can be decisive in either making it a Herculean task or a cakewalk.
When one purchases a house for the first time, one is not just looking for a house; one is looking for a home. The difference is immense. How a first-timer visualizes a new home, may not be on the same tangent as reality.
What First-Time Home Buyers Want
Apart from a reasonable price, there are several other things that new home buyers need to consider. Here are a few of them:
- Decent space
- Good location
- Proper ventilation
- Modular kitchen
- Well-equipped bathroom and toilet
- Carpeting, decking or flooring
- Heating and cooling system
- Basic amenities
However, this is only the ideal picture, and if we look only on the surface, most properties will pass these criteria. But, when it comes to reality, there is a big list of things to review.
It is frequently the case where a person dies leaving behind a mortgage loan along with other assets in the estate. The heirs and the appointed executor then become responsible for the mortgage loan which is secured by the property. The agreement signed by the borrower states that the loan must be paid off before heirs can receive proceeds from the sale of the house. In the same way, the title to the home cannot be transferred to the heirs if there are any creditor claims.
Consult with an experienced estate planning lawyer who can provide guidance for how to best transfer any assets in the estate.
Considerations When Buying a Home
- Accessibility of the Place
Even if a good spacious house is available for a decent price, consider the location and its accessibility from one’s place of work, or school, or places like the market and the bus station. The whole point is that the amount of money that you plan to save by buying this decently priced house will be much more than what you spend on commuting to and from this place.
- Quality of the Basic Amenities
Just knowing that the home will be equipped with all the essential amenities is not enough. What needs to be seen is the quality. Tasting and checking if the water is clean and not hard; making sure that all the electrical connections work safely and the electricity isn’t a problem in that area; that sanitation services are proper; all this can be very helpful in deciding the actual worth of the house.
- Efficiency of Heating and Cooling Systems
One must ensure to check if the thermostat works well. Discovering faults after the purchase will only add to the botheration as well as the expenditure.
- Drainage and Faucets
All drainage points must function properly. Check each point of drainage for clogging or for a foul stench. In a brand new house too, check to see if they are working properly. Try all the faucets. A little caution now can save on plumbing services later.
- Windows and Ventilation
Check all the parts of the house, including the attic and the basement, if you have them. All doors and windows must be opened and closed to check if they are jammed. If you feel that lack of ventilation has produced a musty smell, be wary. It can become worse and even cause mold spots to form after habitation.
- Wiring and Electrical Panels
Check for loose or naked wires or shoddily placed electrical panels. They could get you into big trouble.
- Carpeting Durability
One may see a floor as perfectly carpeted unless the carpet is probed a little. To see the durability of it try picking it up from a corner and look beneath it. The reality will reveal itself.
- Roofs and Ceilings
Theses two things need to be durable. Any glitch here will leave you with the wettest rains and the bitterest winter inside the walls of your very own house. So, check them, even if you have to climb on the roof.
One thing that should be strictly kept in mind that what one may find in the new home will one way or the other need some amount of expenditure to customize it to one’s convenience. So whenever you consider buying a house, keep a margin for that unanticipated expense.
What is Wiser? Buying a New House, an Old One or a Condo?
There are several considerations when comparing the purchase of a new house, a used home or a condominium.
Buying a New House?
- If you are going for a pre-construction purchase, the story is a happy one. You can guide the builder in making it according to your taste and convenience. The kind of paint, faucets, wallpapers, carpets and all that you want is quite feasible.
- If not, even then you have the advantage of getting a house that is newly constructed and hence up to date as far as the architecture, design and facilities are concerned.
- Another significant advantage is that, with everything brand new, thermostat, appliances, plumbing, etc., need very little or no maintenance, for a few years at least.
- These may also be energy efficient since they may have been planned according to the new green energy standards.
- Newly built houses can cost you up to 20% more than relatively older ones.
Buying an Older House?
- All houses built post-1990 in the US are not considered old, but if we talk about prices, they are much lower than the new ones.
- Old houses can be a decent choice if one isn’t too choosy. They are not so difficult to find and can be had at reasonable prices.
- The chances are that one may find a used house that is not too old and has most of the basic and modern amenities. In case you are okay with that, the choices can be ample.
- You can also have tax benefits or credits on these if it is your first home.
- The biggest deterring factor is the maintenance cost. Since the property can be old enough for things in there to be brand new, it pretty mush raises the cost of maintenance.
- You may also be missing on the latest facilities and features.
- Termites, molds, mildew, weather damage, electrical and plumbing repairs, etc., can put up some serious challenges for you.
Buying a Condo?
- Urban living is much appreciated and preferred these days. Condos or condominiums are the kinds of housing facility that provide you the advantage of urban or community lifestyle together with private ownership of the house.
- They are centrally located and so go well with the busy urban lifestyle.
- While the responsibility for maintenance is limited to the interiors of your house only, you, nevertheless, get to enjoy well-maintained community space.
- You may not be obliged to be actively responsible for the upkeep of the exteriors of your house; you do have to pay for it, besides your monthly mortgage.
- Also, if one is a loner, condos may be a bad idea for one may or may not wish to follow the rules and regulations of the inhabitants and the residential society.
Tax Credits for First Time Home Buyers
Since a tax credit is always better than a tax deduction, one must look forward to it when buying a house the first time.
The U.S. Department of Housing and Urban Development can be a real help if you are a first-time buyer. Though HUD doesn’t extend tax credits to an individual customer, it does grant money to the organizations that it has earmarked for such buyers. HUD has a list that gives you such organizations.
Talking of your IRA, for both a traditional and Roth, a $10,000 withdrawal is allowed to every first-timer during his/her lifetime, without having to pay an early withdrawal penalty of 10%. A first-time buyer by definition, according to the federal government is anyone who hasn’t owned a private residence in the past three years of his/her life. There are, however, some other criteria as well, that make you eligible for this.
If you are a Native American buying your first home, you are eligible to apply for a Section 184 loan with its terms and conditions.
Some Important Things that You Need to Know before You buy Your First Home
- You have to know first whether you are the buyer type. If you have a job that takes you from place to place, buying a house can be a rather bad idea.
- Your decision to purchase a house should be sound. You should have figured out if you are ready for owning a home and whether you have arranged an affordable financing plan.
- You will need a real estate agent or mortgage broker who can provide sound advice. Without these two, you may have to face a lot of hardships from what you do not know, but should.
- Calculate all the costs before you make a decision. The cost that you pay to buy that property is not the only cost that you will incur.
- Do a credit check before you apply for financing. Problems can often be easily corrected through one of the major credit bureaus.
- Opt for a down payment if possible (20% is usually mandatory). It adds equity to your house and also brings the monthly payment down.
- Do not miss the inspections and follow the tips given earlier in this article. Also, make sure if you find something lacking, you do make an effort to negotiate and strike a better bargain.
- See if the location is in a school district. If it is, it will cost you more. If you don’t have children, it just doesn’t make sense.
- Check for the construction plans in the neighborhood. It could be vital.
- Keep some contingent money for home improvements. You are going to need it.
Learn about Mortgages
Unless you are a multi-millionaire, you will have to consider this side too. The market is replete with thousands of mortgages, and most of them are available to first-time buyers. You will also find banks and certain building societies that are going to offer you deals that are exclusively for first-timers.
Primarily, there are two types of mortgages are the FRM (Fixed Rate Mortgage) and ARM (Adjustable Rate Mortgage). The names are suggestive enough. In the US, the term is usually fixed at 10, 15, 20, or 30 years. In the former, the monthly payment stays fixed and in the latter, it can be adjusted. Check with a retail or online mortgage broker like Freedom Mortgage to get a sense of the different mortgage programs and rates.
Traditionally, the mortgage was plainly calculated as a multiple of your salary. Usually, you could borrow around thrice the amount of your gross annual earnings. But the scenario is quite different now. Both, the incoming, as well as the outgoing flow of your money, are accounted for before you are granted a mortgage by a bank or a financial institution. They also consider the probability of future rises in the rates of interest and its impact on the payback capacity. But these aren’t the only two criteria. Your credit is one of the main premises. If you are carrying the albatross of a bad debt around your neck, the odds are that your application will be turned down.
Buying a new home is not that hard a job. Nonetheless, making sound decisions at the time of planning may be so. If you do well at the planning stage, the results will be marvelous for sure.