“The major fortunes in America have been made in land.” — John D. Rockefeller.
We all know the deal. Go to college, study hard, get good grades, graduate, get a well-paying job, get married, and buy a home. We often feel like buying a piece of property is the next logical step in growing up.
Lately I’ve been receiving many emails about real estate. Maybe it’s due to the economy and how things have been going.
Let’s answer the important question here…
What’s the best time to buy a home? I didn’t want to pull an answer out my ass. So I decided to check one of my favorite books on personal finance, I Will Teach You To Be Rich.
Ramit Sethi on when you should buy a home:
Buy only if you’re planning to live in the same place for ten years or more.
What if you want to start looking into a home purchase right now? What if you’re a young professional looking to get into ownership? What if right now is that time?
Here’s the simple process for buying a home…
Improve your credit score.
Before you even start looking at places you need to be 100% sure that you have a decent credit score. You really don’t want to get screwed over with a killer interest rate. I’m actually working on a guide right now that deals with your credit and how you can get the most out of credit cards. Stay tuned for more. All I will say for now is that you need a solid credit score before you even consider buying a home. If not, then good luck with those insane interest payments!
You can check out these calculators to see what a difference a lower interest rate will make on how much money you spend during any loan (mortgage or credit card).
Make sure you can afford being a home owner.
The simple rule for home ownership and your mortgage is: a final monthly cost that is no more than 30% of your gross pay. Do all of us follow this rule? I doubt it.
The euphoria of telling your friends that you’re a home owner is pretty intoxicating. The obvious dilemma is that many of us get into ownership before we can afford it. We just think that we need to buy a place once we start working since that’s what adults do, right?
If you’re not sure how much money you can borrow to buy your first home, check out this calculator. Play around with the numbers and be honest with yourself.
Save a freakin’ lot of money for your down payment!
You need to save a lot of money for a down payment alone before you can consider even looking for a home. You can’t just save set amount of cash in general. You need to specifically put money aside for the actual down payment. The reason for this is that you’re going to need a lot of other money for the millions of other expenses that come your way as a new home owner (flat screen TV, house parties, and much much more).
Get a long term loan.
Your night life can be wild and filled with adventure (would you want it any other way?). Your mortgage on the other hand, well that can be long and boring. The best option is usually a 30-year fixed rate loan. You might spend more money this way, but you can also put more money towards your home loan.
Take advantage of government incentives.
Depending on where you live and your circumstances, there are certain government incentives that you can take advantage of as a home owner. Since this really depends on where you live, you know better than me of what’s available to you. Speak to your friends that are new home owners and they should be able to help you with this one.
Wait and save.
It’s okay to chill and save up a bit longer. You don’t have to rush. Nobody wants to rush into marriage, yet most want to rush into buying a home. I just don’t get it. You can get out of a marriage much quicker than you can get out of a mortgage (pretty scary, huh?).
I really hope that I presented all of the information on buying your first home in an easy to read format. Buying a home is an important decision that deserves to be treated seriously. I also hope that you take some time to play around with the calculators I linked to in this article. They can really send you in the right direction.
Are you a new home owner? Do you have any tips for real estate rookies?
(photo credit: drs2biz)