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Riverside & Corona Real Estate
Home Buying BasicsThere's more to owning a home than personal satisfaction. You can deduct the cost of your mortgage loan interest from your federal income taxes, and usually from your state taxes, too. Interest (as opposed to principal) will compose nearly all of your monthly payment, for over half the number of years you'll be paying your mortgage. This adds up to hefty savings at the end of each year. And you're also allowed to deduct the property taxes you pay as a homeowner. Another financial plus in owning a home is the possibility its value will go up through the years. Your choice of location depends primarily on where you work and whether you want to commute, and also on your family lifestyle. Do you want to live near recreation facilities such as a golf course or skating rink? If you have children, how good and how close are the schools? Is public transportation available? If you're considering moving to an unfamiliar neighborhood, take time to drive or walk around it, both during the day and in the evening. Make some notes. It's also a good idea to travel the route to and from your work. There are many other factors you should consider when choosing the location of your home. For example, have property values risen or fallen in the neighborhood? Future development can also affect property values and property taxes, so you'll want to consider whether there are any changes to zoning proposed or any major developments planned. To do this, contact the local municipal office regarding planning and zoning bylaws. Some real estate representatives suggest that, if you're considering the future resale value of your home, it's wiser to buy a modest home in the best neighborhood you can afford than the most expensive home in a modest neighborhood. Using a real estate agent is a good idea for a first-time homebuyer. All the details involved in home buying, particularly the financial ones, can be mind-boggling. A good real estate professional can guide you through the entire process and make the experience much easier. When you're ready to make your purchase, it's important to look beyond your individual purchase before you buy. You need to look at larger market conditions. What's happening around you (house price trends, mortgage rate movements, new home construction) will have an influence on your purchase. The more you know, the more control you have. In a "buyer's market," the number of homes available for sale exceeds the demand, so prices will either stabilize or drop. With fewer buyers and more homes, you not only have more options to choose from, you also have greater negotiating leverage. You have more time to look for the right home and you can evaluate the choices without feeling pressure to act too quickly. A "seller's market" is when the number of potential buyers exceeds the number of homes for sale in a market. In general, you need to come up with enough money to cover three costs: earnest money is the deposit you make on the home when you submit your offer, to prove to the seller that you are serious about wanting to buy the house; the down payment, a percentage of the cost of the home that you must pay when you go to settlement; and closing costs, the costs associated with processing the paperwork and the loan if you are borrowing money to buy a house. A mortgage is security for a loan on the property you own. It is repaid in regular mortgage payments which are blended payments. This means that the payment includes the principal (amount borrowed) plus the interest (the charge for borrowing money). The payment may also include a portion of the property taxes. See current mortgage interest rates. Most people use a fixed-rate mortgage. In a fixed rate mortgage, your interest rate stays the same for the term of the mortgage, which normally is 30 years. The advantage of a fixed-rate mortgage is that you always know exactly how much your mortgage payment will be, and you can plan for it. Another kind of mortgage is an Adjustable Rate Mortgage (ARM). With this kind of mortgage, your interest rate and monthly payments usually start lower than a fixed rate mortgage. But your rate and payment can change either up or down, as often as once or twice a year. The adjustment is tied to a financial index, such as the U.S. Treasury Securities index. The advantage of an ARM is that you may be able to afford a more expensive home because your initial interest rate will be lower. There are several government mortgage programs you may be eligible for if your income is limited, including FHA mortgages which offer the lowest down payments available. Talk to your real estate broker about the various kinds of loans, before you begin shopping for a mortgage. All taken into account, how much can you afford? The shortest and best answer to that question is: it depends--on a number of factors. The most important are your gross household income, your down payment, and the mortgage interest rate. Lenders also consider your assets and liabilities. Your own lifestyle and debt comfort zone also come into play. If you understand these variables, you can examine all your options. You can make the best choice for you and even save money. Lenders follow these two simple rules to determine how much you can afford in monthly housing costs: The first affordability rule that many lenders suggest is that your monthly housing costs shouldn't be more than 28 percent of your gross monthly income (before taxes and other paycheck reductions). Housing costs include including mortgage principal and interest, hazard insurance, real estate taxes, and PMI (if applicable), but exclude utility bills. If you have bad credit and not much for a down payment, you may be a good candidate for one of the federal mortgage programs that are available. A good place for you to start is by contacting one of the HUD-funded housing counseling agencies. They can help you sort through your options. In addition, contact your local government to see if there are any local home buying programs that might work for you. Look in the blue pages of your phone directory for your local office of housing and community development or, if you can't find it, contact your mayor's office or your county executive's office. Hopefully, this will help prepare you to find the right home and make an offer. When the time finally comes, make sure the asking price in line with prices of similar homes in the area, the home in good condition, the price is in line with how long the home as been on the market. Double check all your figures, re-evaluate just what you're looking for, and Happy House Hunting. Additional information: Information about Mortgage Rate Locks Earnest Money Deposits The Importance of the Final Walk Through
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