Buying a home is not a spur of the moment decision. Taking time to prepare and doing the homework not only makes the process less stressful, but will make homeownership a pleasure.
Getting Organized
Start with a loose-leaf notebook and some sharpened pencils. Manila file folders are helpful in organizing bills and other documents needed for loan applications. Having a business telephone directory on hand or access to a computer is a good idea. After making calls, record the phone numbers, contact name and a short note on the conversation in the notebook under a reference tab.
Rent vs. Homeownership
For some renting makes more sense than purchasing a home. The only way to determine this is by comparing the costs of homeownership to renting.
In addition to mortgage payments (first and second mortgages) taxes and insurance (mortgage insurance and homeowner insurance) must be included in the owning a home column.
The next items in the column should be utilities. For a home these include gas, oil, electricity, water, waste disposal (garbage pickup), and optional telephone and cable costs.
Condominiums and Co-op Fees
Some first time homebuyers decide to purchase condominiums or co-operative units because many of the utility and maintenance costs are included in the homeowners’ association (HOA) fees. Include these fees on the list and remember that all utilities may not be covered. Contact several homeowners’ associations to get an idea of what the HOA fee covers.
Mortgage Credit Certificate
The Mortgage Credit Certificate program offers a federal tax credit for mortgage interest paid. Most states participate in this program. The credit can be used to increase the homeowner’s take home pay and offset the costs of owning and maintaining a home. Contact area realtors, state and county housing departments and employer payroll departments for information on this program.
Maintenance Costs
Maintenance costs cover a wide range of items from lawnmowers to roof repair. Trees have to be pruned, lawns mowed, heating systems maintained, windows caulked in cold climates, broken pipes and windows replaced, leaky faucets repaired. Make maintenance costs an item in the homeowner column.
Call local utility companies and work with a local realtor to establish a good estimate of these costs. Always go with the higher estimate.
Home Improvement Grants
Many states and counties offer home repair and improvement grants to homeowners. Homeownership is a requirement for most of these grants. Knowing the eligible areas, property types, and grant uses will assist in determining if the grants can be useful after purchasing a home. Visit myhomedownpayment.com, and contact state and local housing departments for grant information.
Intangible costs
Mortgage payments, utilities, maintenance and repairs are the tangible costs of owning a home. Intangible costs require another list that should include the following questions:
Why do I want to purchase a home?
Do I have enough time to maintain a home? (Not maintaining a home will decrease the property’s value.)
Can I change a light bulb, mow a lawn, paint the front door, replace a lock, caulk a window, repair a faucet, trigger an electrical circuit, recognize mold or termite damage?
Do I have a tool kit?
Am I willing to make financial sacrifices if owning a home costs more than I am paying in rent now?
What am I willing to cut back on financially to own a home?
Will a major financial emergency (health, car repairs, or job loss) impact my ability to make my mortgage payment?
Do I have a savings account?
If I create a budget will I stick to it?
If owning a home requires a lifestyle change, am I sure (as much as it is possible to be) I want to change for the long term?
How often do I call my landlord to make simple repairs?
Next
If you’ve come this far stay tuned the next article will cover homebuyer’s classes. Questions, comments and stories are always welcome.
The author, Yasmin Sabur, is the founding member of My Home Down Payment, an e-education business promoting mortgage down payment assistance programs for low-to-moderate income families.
