- The
Best Investment
-
Income Tax Savings
-
Stable Monthly Housing Costs
-
Forced Savings
- More
Space
INCOME
TAX SAVINGS
 Because of
income tax deductions, the government is basically
subsidizing your purchase of a home. All of the interest
and property taxes you pay in a given year can be deducted
from your gross income to reduce your taxable income.
FORCED
SAVINGS
Some people are
not very good at saving money, and a home purchase is an
automatic savings account. You accumulate savings in two
ways. Every month a portion of your payment goes toward the
principal. Admittingly, in the early years of the mortgage,
this is not much. However, in the early years if you double
the principal payment you will not only double your savings
but will pay off your mortgage much sooner.
Secondly, on
average your home appreciates in value from between 4% to 7%
annually. However, in some years it may even depreciate.
Over time, history has shown that owning a home is one of
the very best financial investments.
IMPORTANT THINGS TO AVOID BEFORE BUYING
-
Don't Move Money Around
- The
Effect of Changing Jobs
-
No
Major Purchases of Any Kind
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DON'T
MOVE MONEY AROUND
When a lender reviews your
loan package for approval, one of the things they are
concerned about is the source of your down payment and
closing costs. You will be required to provide bank
statements for the last three months to show your liquid
assets.
If you have been
moving money between accounts during that time there may be
large deposits and withdrawals in some of them.
The mortgage
underwriter will probably require a complete paper trail of
all deposits and withdrawals. You may be required to
produce cancelled checks, deposit receipts with could get
quite tedious.
You should leave
your money where it is until you talk to a loan officer.
NO MAJOR
PURCHASES OF ANY KIND
 When an individuals income
starts growing and they manage to set aside some money, they
commonly desire the experience to spend money.
Do not
purchase large ticket items such as a new car, furniture,
jewelry or travel that will be paid with time payments.
This may reduce your qualifications to purchase your home.
Because mortgage loans are based on Income-to-Debt ratios,
thereby many large purchases may disqualify your ability to
purchase. However, after you have purchased your home then,
if you have the funds and the desire to spend money, you can
buy that car or new furniture.
GET
PREQUALIFIED
 Before you even start looking
for a home you should do your homework. Visit with your
local bank's mortgage officer or a mortgage broker to
determine how much of a mortgage for which you
realistically qualify. This will also include having a
credit check completed, producing check stub payments, tax
returns for the past two years, the last three months of
your bank savings and checking statements. Once that is
completed your prospective lender will issue you a
commitment letter for a specific amount of a mortgage
subject to an appraisal and title search.
This is
invaluable in today's market place as most Realtors and
sellers will insist that a prequalification
letter/commitment letter accompany any offer made on a
specific property. This can help you by not loosing out on
a home that you wish to purchase or could be competing with
another buyer on the same property and not having that
letter.
DEFINE
WHAT YOU WANT
 The next step is to create a
realistic idea of the property you'd like to buy. What
features are most important to you? Make two lists: one of
the items you can't live without and one of the features you
would enjoy. Refine the lists as you house hunt. It is also
helpful to search online to see what is currently available
on the market. Your real estate professional can then show
you houses that meet your expectations.
CHOOSE A REALTOR
 Talk to a few Realtors and
make a determination who you are most comfortable with.
Find out how much experience they have in a particular areas
in which you are looking for a home. Be sure they are up to
date on current market values and conditions. Once you are
comfortable with an agent, stay with that agent alone.
If later you feel that you have made a bad choice, fire that
agent and hire a new agent. If you expect that agent to be
loyal to you and keep you abreast of all new properties on
the market, you should be loyal to that one agent. This
agent can show you anything on the market no matter who it
is listed with and in many cases even FSBOS. Your Realtor
will be able to assist you with making an offer, home
inspections, and arranging the closing with the title
company and lender.
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Buying
a home can be one of your most significant investments in
life. Not only are you choosing your dwelling place, and the
place in which you will bring up your family, you are most
likely investing a large portion of your assets into this
venture.