3 Decisions You Need to Make Before You Buy Your First Home

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Buying your first home is an exciting yet daunting task. There are many steps throughout the homebuying process, and several important decisions need to be made by the buyer. Continue reading and discover three decisions you will need need to make before you can purchase your first home.

What is your budget?

This arguably the most important consideration when a person goes to purchase a home. Because your budget is going to dictate several aspects of your home purchase, you need to set a clear budget before you dive into your home search. Many financial experts believe that your entire mortgage payment should not exceed more than a quarter of your gross income.

How long to do you plan to stay?

Most people do not stay in their first home for the rest of their lives. While it can be challenging to predict the future, you want to have some idea of how long you intend to stay in the home. Many financial experts recommend staying in your first home for at least three years before you move again. This is because it usually takes homeowners a few years before they can pay off a chunk of their mortgage.

Do you have the right real estate agent working for you?

If you want the home buying process to go as smooth as possible, take the time to choose the right agent. They can make a considerable difference in the amount of time it takes to pair you with the right home. Be sure that the agent understands the local market and appreciates what you are looking for in a home. Don’t be afraid to speak with multiple agents before you decide which one is right for you.

HUD Foreclosures

HUD foreclosures and VA Foreclosures are some of the best homes to buy when price is part of the equation. As with most Americans, price is always a concern. If not buying the same house for less, why not buy more house for the same dollar invested? When looking for a good deal it is hard to do better than the VA or HUD foreclosures market. The simple truth is that there are just more VA and HUD homes on the market, as they represent such a large number of mortgages that are generated each year. This translates into more foreclosures just by the magnitude of difference between all others comparing to the two largest.

The two largest also being government owned and operated means that they have less time to wait to make money back on the home. The FHA is especially known for selling HUD homes for less than the average sales price in a given area. FHA foreclosures represent a fraction of HUD but they are still a significant number of homes and both should be considered.

VA (Veterans Administration) and HUD (Housing and Urban Development) have different and unique opportunities for the buyer. Both are often forgiven for the local taxes normally associated with the purchase of a home (this is on a county by county basis). Be sure to ask the local title company or escrow company to look into it for you before closing as this is often missed due to their are not used to dealing with the 2 to 3 percent of the market that VA and HUD foreclosures represent.

Foreclosure Listings Increasing

As the market settled after the mortgage meltdown foreclosure listings also settled and fewer homes were on the market with a placard reading “Bank Foreclosure” in big red lettering. This was a good thing for the entire real estate market. Having an abundance of foreclosures brings the entire market down and it makes it harder for home owners, who would like to move, to get the appropriate price for their home as a similar home down the same street was sold for substantially less and the appraiser is using the foreclosure as a comparable sale.

This is just one of the problems when there are too many foreclosure listings in any area. Another issue is the television set that sits in everyone’s living room harping about the price of homes based on the number of foreclosures and this constant barrage of negative information makes most people sit on the sidelines waiting for the market to either implode completely or to correct itself. Meanwhile while they wait, others are buying foreclosure listings and making great investments.

Whatever the reason, a market can only handle so many foreclosure listings at any given time. The more foreclosures, the lower the market gets and this is a lesson the banks that were foreclosing and selling off realized too late. The market and their investments would have been better off if there had not been a rush to divest themselves of the toxic assets made more toxic by their own actions.