Today I am going to talk about 7 simple rules first time home buyers can follow to help generate wealth with real estate.
In my 20+ years as a mortgage professional, I have seen every RE scenario imaginable from massive wealth creation to bankruptcy. What I have learned is that there are a few simple rules that successful first time buyers employ to greatly increase their odds for success.
- Do not over pay! Simple right? Wrong. It is easy to get caught up in the emotion of a purchase or to “justify” a high offer based on fear of losing out. To insure you do not overpay, always check multiple comps for the neighborhood and have a game plan before deciding to make an offer. Paying the right price up front is the best way to insure a good return.
- Buy a home with room for improvements. Buying fully remodeled homes or incurring buying and selling costs associated with multiple “step-up” homes is costly so consider putting that money into remodeling instead. If you are strategic about the improvements you make, the return on investment may surprise you.
- Buy only what you can afford. Calculate the mortgage payment, taxes and insurance. Those costs should be approximately 30% or less of your income. Remember to consider your full financial picture before making a buying decision and don’t forget to calculate worst case scenarios for major life changes.
- When considering the price of the home, do not forget about closing costs. Closing costs can add thousands to the base price of the home and are not easily recouped.
- Interview multiple real estate agents before deciding on representation. Check references and remember that they work for you. When you choose an agent be clear about your goals, boundaries, and limitations. The more they know upfront, the more likely it is that they will be a good partner in helping you to make a smart buying decision.
- Anticipate maintenance, i.e. roof or plumbing repairs. Budget for the inevitable and when possible, put aside money every month to help pay for large anticipated projects such as a new roof or paint. Keeping your home well maintained will help to insure the best resale value down the line.
- Be picky about your mortgage. Just because someone tells you they found a lender that will finance your purchase, do not assume there isn’t a better fit for you. Check and double check that your broker has researched every scenario and that you fully understand all of the costs involved. When the transaction is complete you should feel comfortable that you made the best decision possible.
Your home can be a wealth builder if you make smart choices and budget properly. For more great information on how to get started with your first home purchase, download our free CA Home Mortgage kit at www.mycahomeloan.com/kit.
We hope this has been helpful information, but if you want us to crunch your specific numbers, please call for a free, no obligation consultation and answers to any other questions you may have.
Michael DiVita
President and Founder, DiVita Home Finance
