July 27th, 2018

Five essential home -buying tips

Whether buying a first home or looking for an upgrade, there are things you can do to feel more confident as you begin your search.

1. Consider all costs: The mortgage is not the total cost of your home. It usually only covers principal, interest, property taxes and homeowner’s insurance premiums.
2. Be flexible but firm: Finding the right home requires a balance of flexibility and finesse. A real estate agent can be of enormous benefit.
3. Meet the neighbors: Take time to walk the street and gauge compatibility with the neighbors.
4. More house is more work: Money for maintenance on a bigger house is money in your pocket at a smaller house that has many of the features you want.
5. Use your head, not your heart: Take time and think through every aspect of the process.

If you love the idea of being a landlord, and don’t mind being on duty around the clock, buying an investment property may be the wealth-building option for you.

Property values have enjoyed a steady increase over the decades. That’s why real estate has earned its reputation as a sound investment that builds wealth and credit.

Most people, however, don’t have the quantity of cash on hand to purchase a house or apartment building outright. Still, if becoming a landlord means taking out a 30-year mortgage, the monthly payments from the tenants should be enough to service the loan and build equity for you, while leaving some cash flow so you can maintain the property.

Be mindful of the inquiry stage. Once you decide to purchase an investment property, it’s important to do everything you can to make sure your credit score stays as high as possible until the loan is approved and signed. Your goal is to land the best possible interest rate, because even half a percentage point can add tens of thousands of dollars of total interest payments to a 30-year loan (and affect your wealth-building abilities). During this time, things like continuing to make on-time payments on your existing loans can be helpful in maintaining your credit score.

Keep credit utilization low. When maintaining a property, having access to credit can be helpful because it lets you make repairs and keep things in good living condition for your tenants. One thing that can affect your credit score is the amount of credit you’re using. Unfortunately, keeping a higher balance could result in a lower credit score. As a rule, keep your credit utilization at 30 percent or less.

Keep a cushion of cash. It happens. You get that call about a water leak, and before you know it, you’re spending your Saturday evening pricing plumbers, searching for one whose overtime rate is only in the range of mildly outrageous. Build an emergency fund in your savings account, and keep your credit paid down so you always have that cushion to fall back on during any crisis.

Beware of low and no-interest financing deals. When it’s time to replace the oven range or a refrigerator, one of those “no payments, no interest for 18 months” deals can seem like a lifesaver. It sounds like a great deal, but these alluring promises are designed to play a psychological trick on you. Because you don’t have to pay yet, it doesn’t really feel like spending money when you’re making the purchase. However, once the interest-free promotional period is up, a double-digit interest rate often kicks in. If you don’t have the cash to pay off the balance or make payments, you could end up with penalties that can affect your credit score.

—Brandpoint

home buying, real estate, tips