3 Financial Things to Consider Before Buying Your First Home

Thinking of purchasing your first home? Congratulations, that’s a huge step to take! While many people want to rush in and buy the first home they see there are a few financial things that you should think about before you purchase anything.

How much home can you actually afford?

This might seem like a no-brainer but you have to make sure you can actually afford your house. This doesn’t mean looking at how much money you have to spend but how much you can spend on a month-to-month basis. For example, if you have $1200 to spend on a mortgage you need to make sure you factor in miscellaneous expenses and regular expenses. Maybe you can afford that $1200 but you didn’t consider that your food budget brings it down to $800. The best thing you can do for yourself and your future home is make sure that you can afford it.

  1.  Make sure you have a buffer

Staying on the topic of financials, ask yourself if you have a buffer for your home expenses. Because you are going to be a homeowner there are surprise expenses, like a car repair, that could creep up and ruin your budget. You want to make sure that at any given time you have more than $1000 in your checking account. In fact you’re going to want three to six months of living expenses in your accounts just to make sure that you’re covered in case of some unexpected event like being laid off.

  1. Know the other expenses

Buying a home isn’t just the cost of the home or the down payment. In fact there are a lot of additional factors that you should consider when approaching the cost of your home. Your home will need to be appraised, so there’s an appraisal fee, you need to also find out who will be responsible for the home inspection. Then think about what you might need for your new space – does the home need landscaping? Do you have the tools to mow the lawn or cut the hedges? What about furniture – do you have everything that you need? How about your moving costs from your old place into your new place?

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3 Financial Things to Consider Before Buying Your First Home

Things You Need to Know Before Buying Your First Home in Rhode Island

If you are thinking of moving to Rhode Island, there are a few things you need to know about. Did you know the state of Rhode Island does not provide a first-time buyer grant program for its residents? What is provided for residents is a program called “FirstHomes” program? This is a program that offers you 100% financing. With this program, you will not need a down payment. ”Beyond First Homes” is another program you should know about. This program does not require you to be a first-time buyer. They also have a low-down payment requirement. Lastly, the program called the “LastingHomes” is offered for those who are looking to prepare a home. Perhaps you have found a foreclosure and need help fixing it up. These programs do have eligibility requirements and limitations. All you need to do is investigate to see which program is the best fit for you. There is more good news, which is that the federal government offers grant assistance for first-time home buyers in Rhode Island. This program is maintained by the United States Department of Housing and Urban Development and is called the Homes and Communities program. You can find more information about this program by visiting, HUD Grants.

When applying for assistance or any of the programs above you must remain patient. This process takes time. It would be in your best interest to have a real estate agent who is familiar with these programs.

You will discover that Rhode Islanders do not seem to leave the state that often. Although the state is the smallest state in the nation it has so much to offer such as amazing beaches, history, nationally acclaimed restaurants, and more. What are you waiting for? It is time to pack up the moving truck and start a new adventure with your family in the great ocean state.

At Keller Williams Next Move Realty, our experience is your advantage. We welcome you to comment below with any questions you have about your Rhode Island property!

Things You Need to Know Before Buying Your First Home in Rhode Island

Why is Real Estate such a Great Investment?

Written by Alexander Biliouris

Although it’s found all over the world, there is a finite amount of real property. Second, the value of real property is typically correlated with supply and demand, and as the world’s population continues to grow, demand will outgrow the supply of it. Third, we really need it; after all living in a cave just doesn’t do it for most people these days. Last, and perhaps the most attractive feature of this investment vehicle, real estate is a tangible asset. So you can physically touch and control it, unlike many other investments that are created from fictitious market models or pie in the sky expectations/speculations.

It’s no secret that real estate has taken a significant hit over the past several years. However, upon further investigation, it is easy to see that this was a result of people losing sight of some fundamental investment principles that any investor needs to weigh and consider before placing their hard earned money at risk.

If you approach any individual who purchased their real estate at the peak of the market, now finding themselves underwater because they paid an inflated value for their investment, I’m sure they aren’t too fond of real estate at this time. However, if you really examine most real estate transactions that are now short sales, foreclosures, or Bank REO’s ( real estate owned), it is evident that the fundamentals were neglected. During the peak of the market, ignoring fundamentals gave way to momentum. Momentum buying is like playing musical chairs, as soon as the music stops someone is going to be left out in the cold.

Looking further at different real estate cycles over the years, you’ll find that most people tend to move in a given direction. Once real estate values increase, people start buying, and when real estate values drop, people will start to sell. I guess human nature requires us to emulate others and gives way to this herd mentality. I would be very cautious of this behavior, because we all know where the herds tend to end up…the slaughter house, figuratively speaking. For maximum return on your real estate, I would propose a contrarian philosophy that requires you to move in the opposite direction during any major market cycle.

So now let’s take a look at what I believe to be some of the most important fundamentals of any type of real estate transaction. These are general concepts but applicable to residential, commercial and investment properties. First, the old adage of Location, Location, Location is still relevant and probably the most important element to consider before buying.(for a more in depth discussion about location please visit the following site: (http://www.nuwireinvestor.com/articles/real-estate-investingfocus-on-the-fundamentals-51403.aspx) Second, don’t over extend yourself, make sure you can afford the property you are buying. By afford, I mean you should also have adequate savings to navigate through the unexpected (what is adequate for one person or investment may not be for another). Third, make sure you do your due diligence, including property inspections, so you can avoid any major surprises down the road. Fourth, make sure you factor in the cost of capital improvements and replacements. These costs are related to items like your roof, siding, electrical, plumbing & HVAC systems. Not planning for these improvements or replacements could have a major negative impact on the value of your investment. Fifth, you made a plan to enter the real estate market; you should also have a plan to exit the market as well. Although worse case scenarios usually don’t happen, the best laid plans can go awry. Having an exit strategy will help you prepare to minimize losses and maximize the value of your real estate investment.

I advise my clients that if you apply all of the right fundamentals to your real estate purchase, a good deal today will be a good deal 20 or 30 years from now. How do I know this to be true? Over long run, real estate in general, has always appreciated in value. Yes, there have been highs and lows in the market, but as long as you are not pressured to move in any one direction during those peaks and valleys, your investment should remain sound.

There are many external factors and unknowns that play a role in your ultimate return on investment. Keeping an eye on the fundamentals should be an intricate part of your purchase and it will help you avoid the pitfalls that plague most failed real estate investments.

So, if I still haven’t convinced you how good an investment real estate can be, here are a few other things to consider:

1. While there have been peaks and valleys, new and existing homes have appreciated in value over the last 50 years.

2. Over 40% of the wealth in this country is held in real estate.

3. More than 25% of retirees will depend on their real estate investments to fund their retirements

4. Using various IRS guidelines, such as a tax deferred exchange; real estate is one of the last investments that can grow without Uncle Sam constantly picking your pocket.

5. The mortgage interest and depreciation tax deductions make the real cost of owning real estate substantially less than most other investments.

6. You will pay fewer taxes.

7. You own it, it’s tangible and you have control over it.

8. It offers inflation protection.

9. It forces you to save.

10. It’s an investment which is an essential part of any plan to grow wealthy.

www.NextMoveRealty.net

Why is Real Estate such a Great Investment?