Becoming a Homeowner

Many people dream of having a place of residence they can call their own. Their are different things you have to consider before buying a house. You should consider the benefits and drawbacks of this commitment. Plus, you should look into the different types of housing units and determine the amount that you can afford.

What are the Benefits of Homeownership?

Whether you purchase a house, a condo, or a manufactured home, you can enjoy the pride of ownership, financial benefits, and lifestyle flexibility of homeownership.


1. Pride of ownership
Having a place to call your own is a primary motive of many home buyers. Stability of residence and a personalized living
location can be important. Pride of ownership may be reflected in community activities.

2. Financial benefits
Homeownership has financial benefits. You can deduct mortgage interest and real estate tax payments for federal income
tax purposes. Plus, you can experience an increase in the value of the property. Furthermore, in most states you can
borrow against the equity in their homes. Equity is the home value less the amount you still owe on your mortgage.

3. Lifestyle flexibility
Homeownership gives you more opportunity to express individuality. Homeowners have greater freedom than renters in
decorating their dwellings and having friends and family over to visit.

What are the Drawbacks of Homeownership?

The investment imposes financial risks, limited mobility, and higher living costs.

1. Financial risks
Getting mortgage financing may be a problem due to your situation or current economic conditions. Plus, obtaining the
money for a down payment can be a difficult thing to do.

2. Limited mobility
If changes in your situation make it necessary for you to sell your home, doing so may be difficult. High interest rates can
result in a weak demand for houses.

3. Higher living costs
The homeowner is responsible for maintenance and costs of repainting, repairs and home improvement.

Real estate taxes are a major expense of homeowners. Even for homeowners who no longer have mortgage payments,
higher property values and higher tax rates mean higher real estate taxes. Higher taxes affect the homeowners more directly than renters, who pay them in form of higher rent.

Here are a couple of different types of housing you can purchase:

1. Single-family housing
2. Multiunit housing
3. Condos
4. Cooperative houseing
5. Manufactured homes
6. Building a new home

As you determine how much of your budget you will spend on a home, consider the price of the house along with it’s size and quality.

Price

The amount you can afford to spend is affected by funds available for a down payment, your income, and your current living
expenses. You should also consider the current mortgage rates, the potential future value of the property, and your ability to make monthly mortgage, tax, and insurance payments.

Size and Quality

You might not get all features you want in your first home, but you should purchase what you can afford. As you move into the housing market, your second or third home can include more of the features you want.
Ideally, the home you buy will be in good condition. But in some circumstances you might buy a house that needs work , so you can purchase it for a lower price.

Selecting a Location

They always say the three most important factors to consider when buying a home are location, location and location.
You need to look into if you want to live in small town, bigger city or near a resort area.

Using a Real Estate Agent

A real estate agent can help you assess your housing needs and determine how much you can afford to spend on a house. Furthermore, they have a wide variety of listings of available houses in their area.

The main services a real estate agent provides is
1. presenting your offer to seller
2. negotiating a settlement price
3. assisting you in financing
4. and representing you at the closing.

Plus, a real estate agent will also recommend lawyers, insurance agents, home inspectors, and mortgage companies.

Since, the seller usually pays the real estate agent’s commission, the buyer doesn’t incur an extra cost. However, it might get included in the price of the house and that means that the buyer pays for it indirectly. Sometimes the agent works for the buyer and may be a dual agent, that means he is working for both the seller and buyer. In some states, if that is the case the buyer must sign a disclosure acknowledging that he knows that the agent is working for both.

Conducting a Home Inspection

Before making the decision to buy the house, you should have a trained home inspector evaluate the property, to minimize future problems. The mortgage company will usually conduct an appraisal to determine the fair market value of the property; although it isn’t a detailed inspection, it help you assess the condition of the house. Furthermore, a home purchase agreement may include the right to have a contractor or several professionals inspect the property.

Usually after you have selected the house, it’s time to determine an offer price and to negotiate a final buying price.

Certain factors like recent selling prices in the area, current demand for housing, the length of time the home has been on the market should be considered before making an offer. In times of low interest rates you will have to offer a higher price and on the other hand if the house has been on the market for a year you can offer a lower price. Your offer will be in the form of a purchase agreement, or contract. This document is your legal offer to purchase the home.

Negotiating the Purchase Price

If your offer is accepted , you have a valid contract to buy the house. If your offer is rejected, you can put another offer in or keep on looking for something that is more in your price range. In times of high demand for housing, you might have a smaller window to work with and the seller will more than likely have a couple of offers. On the other hand, a slow market may mean lower prices and a chance to obtain various amenities.
Once the price has been agreed on, the purchase contract becomes the basis for the real estate transaction. At this time, the buyer has to present a portion of the purchase price, to show that the purchase price is serious. At the closing time, this money is applied towards the down payment.

Obtain Financing

First you must determine the amount of your down payment. A large down payment, such as 20 percent will make it easier for you to get a mortgage.
Private mortgage insurance is usually required if the down payment is less than 20 percent. This coverage protects the lender from financial loss due to default.

Qualifying for a Mortgage

Payments on a mortgage are usually made over 15, 20, or 30 years. To qualify for a mortgage, you must meet criteria similar to those for other loans. Your income, other debts, the amount available for down payment are a couple of factors that influence the ability to obtain a mortgage.

Close the Purchase Transaction

The closing involves a meeting between the buyer, seller and lender of funds, to complete the transaction. Documents are signed, last-minute details are settled, and amounts are paid.

All those things have to be taking into consideration. The one thing you don’t want to do is get a house or home you really can’t afford just to see it get foreclosed. Although owing a house is a beautiful thing you need to make sure you get something you like, enjoy and you are able to make your mortgage payments on time.

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