Buyer's Guide

Why Should I buy?

If you're like most first-time home buyers, you've probably listened to friends', family's and coworkers' advice, many of whom are encouraging you to buy a home. However, you may still wonder if buying a home is the right thing to do. Relax. Having reservations is normal. The more you know about why you should buy a home, the less scary the entire process will appear to you. Here are eight good reasons why you should buy a home.

Pride of Ownership
Pride of ownership means you can paint the walls any color you desire, turn up the volume on your CD player, attach permanent fixtures and decorate your home according to your own taste.

Appreciation
Although real estate moves in cycles, sometimes up, sometimes down, over the years, real estate has consistently appreciated

Mortgage Interest Deductions
Home ownership is a superb tax shelter and our tax rates favor homeowners. As long as your mortgage balance is smaller than the price of your home, mortgage interest is fully deductible on your tax return. Interest is the largest component of your mortgage payment.

Property Tax Deductions
IRS Publication 530 contains tax information for first-time home buyers. Real estate property taxes paid for a first home and a vacation home are fully deductible for income tax purposes. In California, the passage of Proposition 13 in 1978 established the amount of assessed value after property changes hands and limited property tax increases to 2% per year or the rate of inflation, whichever is less.

Capital Gain Exclusion
As long as you have lived in your home for two of the past five years, you can exclude up to $250,000 for an individual or $500,000 for a married couple of profit from capital gains

Preferential Tax Treatment
If you receive more profit than the allowable exclusion upon sale of your home, that profit will be considered a capital asset as long as you owned your home for more than one year. Capital assets receive preferential tax treatment.

Mortgage Reduction Builds Equity
Each month, part of your monthly payment is applied to the principal balance of your loan, which reduces your obligation. The way amortization works, the principal portion of your principal and interest payment increases slightly every month.

Equity Loans
Consumers who carry credit card balances cannot deduct the interest paid, which can cost as much as 18% to 22%. Equity loan interest is often much less and it is deductible. For many home owners, it makes sense to pay off this kind of debt with a home equity loan.
The following information was taken from:

“Before You Buy a Home - Look at Eight Reasons to Buy a Home”
Elizabeth Weintraub
www.homebuying.com

Set your price range

In order to determine your price range you must first consider the following:

1. Money you saving for emergencies.
2. Closing cost – run about from 1% to 3% of purchase price.
3. Cash to improve or/and furnish your home.
4. Assets you can not or would not liquidate

Add all those expenses together and subtract them from your net worth. That would be the maximum down payment on your house.

Now when you know how much you are going to put as your down payment, consider the following:
Lenders usually require a 20% down payment.  If your down payment is less than 20% lenders would consider your loan as a risk and would charge you a privet mortgage insurance (PMI) .

• Most loans would require a down payment of at least 3% to 5%. Although some 100% loans are also available. Making a down payment of 20% would free you from the mortgage insurance premiums and qualify you to some fast track financing programs.

Making a higher down payment would bring your monthly payments down. And cut down you interest amount over time;  

Think how much you can pay, most lenders suggest devoting no more than 36-42% of your gross monthly income to housing expenses.

Find your home

These days, 80 present of home searches start on the internet, but you might also consider working with an agent from the get go. In this case Gem Realty Partners realtor would gather all the properties that would meet your needs.  He will schedule for you to visit open houses. During the open houses, record your observations ask all the questions you would want to know about the property. After attending few properties and you can cross reference them to match your needs, make sure you gathered as much information as you need about each property. On average the buyer will view about 15 properties before buying one. It is only an average, therefore, you might buy the first home you see or look at more homes. Check out if the floor plans would fit your needs, and if remodeling and/or addition is possible and within budget.

Elements affecting the purchase price of a home

• Asking Price. This is the main factor that would control if you want to see the house. The starting price is the starting point of negotiations. The market would set the right price, make sure to compare homes sold nearby.  
• Location. The location of the house is very important for you. It all depends on what neighborhood and life style you would chose.
• Property condition.  Check out the conditions of the house, if the house is fixer upper you can negotiate the price down.
• Economy. The strength of the real estate market is a big factor in the price of the home. The longer the house is on the market, the price tent to decline.
• Contract terms. 

Negotiate

Decide how much you want to offer and develop a negotiation strategy. Remember, you might be not the only one making offers on the house. If you offer too little the house might go to another buyer, on the other hand if you offer too much, you might be paying more than the true value of the house. To determine the price you should offer you could consult your real estate agent and check out similar properties around the neighborhood for the price range.

Check if everything is Okay

The first thing you should do after you got your offer accepted is to check the conditions of the house. Find the right home inspector. While walking about the house, you might notice some defects by yourself but you will be surprised to find out how many you missed.
The inspector would be able to check and identify large range of defects including:

1. Defects in home foundations
2. Presence of lead paint or pipes and asbestos
3. Plumbing and sewer that is not up to code or leaking
4. Roof and skylight leaks
5. Problems with wiring and the electrical system
6. Substandard finishes
7. Mechanical defects in heating and ventilation systems

Remember, the buyer is the one responsible to order a home inspection.

Close the Deal

The closing date is the date when the ownership change hands. Flexibility on the closing date can give a buyer big advantage over other potential buyers, sometimes it can allow you negotiate a lower price than others.

Moving in!

There are few things to think about before you move in. think if you would like to remodel the house or leave it as it is. In this case come out with an outline to keep you on track to make sure everything goes as planned. Here is a comprehensive checklist that would keep you on track.

[Two months before moving]

• Inventory all the house items to be moved
• Move school records of your kind to the new district and/ or day care.
• Call your insurance agent to check the changes that might accrue and arrange insurance for your new home.
• Make a list of friends, relative and business that would need to be notified of your move.

[One month before moving]

• Plan to use things that cannot be moved, such as frozen food.
• Purchase collecting boxes and other packing supplies.
• File for address change, you can do so online.
• Contact utility companies to disconnect or move service.
• Start packing items that are not use very often. Also disposing of the items for a yard sale or donations.
• Confirm movers, truck rental reservations.

[A week before moving]

• Finish packing and prepare an “essentials” box to more with you rather than with the movers
• Do not disconnect your phone line unless the day after loading.