If you're thinking of purchasing your first home, you probably have a lot of great ideas about what you'd like - such as several thousand square feet of living space, a two-car garage, large fenced-in lot, one or two fireplaces and a panoramic view. But it may be time for a reality check.
Most first-time buyers want their dream home right away. However, that dream home likely sells for several hundred thousand dollars and the down payment is more than you earn in two years. Not to mention the mortgage payments - which are three times your monthly take-home salary!
The best way to deal with this reality is to match your financial capabilities with the home that meets as many of your needs as possible.
Many first-time buyers purchase what is commonly known as a "starter home." There's nothing wrong with this approach. In fact, it's good common sense to avoid buying a home that will stretch your budget to its breaking point. Remember, the starter home is just that - a way to get started in long-term real estate investment.
To see how much you can afford, you should take a close look at your financial situation. The vast majority of home buyers lack the funds required to buy a home without assistance from a bank or other financial institution (commonly called a "lender"). So, for most of us, buying our first home means combining our savings with money borrowed through a special type of borrowing arrangement called a "mortgage."
Borrowing to purchase is not only acceptable, it's desirable. Even people buying millions of dollars' worth of real estate borrow to make the purchase
There are two types of costs in buying a home:
the amount of money you'll need for the initial purchase; this consists mainly of the down payment and other costs such as legal fees and taxes; and
the ongoing costs of paying back your mortgage, along with monthly operating costs for utilities, maintenance, insurance and annual property taxes.
osts of buying a home =
* Down payment & * Mortgage
* Legal fees
* Utilities
* Inspection fees
* Maintenance
* Taxes
* Insurance
* Property taxes
When lenders assess your ability to buy, they look at your ability to pay both types of costs in determining how much money they will lend you. Before you ever visit a lender, you can predetermine this amount, using the same formulas they do.
Lenders use several factors in judging your ability to handle a mortgage, including your income, employment record and credit worthiness. However, one way you can estimate the price range you can afford is to look at the amount of money you have available for a down payment.
The most common mortgage is a "conventional mortgage." In this type of arrangement, lenders will loan up to 75 per cent of the "appraised" value (estimated market value) of the property or the purchase price - whichever is lower. The remaining 25 per cent is the amount you will contribute as down payment.
If you want to buy a home that has an appraised value of $200,000, a lender may loan you 75 per cent or $150,000 on a conventional mortgage when you contribute a down payment of $50,000.
If you plan to borrow funds through a conventional mortgage, multiply the money you have available for a down payment by four. For example, if you have access to $40,000, you may be able to purchase a home with an appraised value of $160,000 ($40,000 x 4 = $160,000).
This assumes, of course, that you have sufficient income to make the payments on a $120,000 mortgage (75 per cent of $160,000). Most lenders will not permit a borrower to take on a debt load the borrower can't carry. That's why reputable lenders "qualify" potential borrowers before issuing mortgages.
Most lenders say that your monthly housing expenses (mortgage payment and taxes), plus condominium maintenance fee, if applicable, would not exceed 30 per cent of your monthly gross family income.
This is called your Gross Debt Service (GDS) ratio. Some lenders will go as high as 35 per cent, depending upon a number of variables.
Lenders also use a second calculation in qualifying you for a mortgage. It's called the Total Debt Service (TDS) ratio. Generally speaking, no more than 40 per cent of your gross family income may be used when calculating the amount you can afford to pay for mortgage payments and taxes plus other fixed monthly expenses.
These other fixed costs are your ongoing commitments and can include auto, student or personal loans, as well as revolving charge accounts. Again, the 40 per cent calculation may vary slightly among lenders.
By knowing exactly what you can afford, you can make your home purchase with confidence.
http://www.alamq.com/index_files/homebuyingtips1.htm
Saturday, August 4, 2007
What kind of home is for you?
When most of us think about owning a home, we usually imagine a typical two-storey, detached house. However, today’s homebuyer has a wide array of home ownership options available.
With so many choices, how do you choose the type of home that’s right for you? Your first step should be to enlist the services of a REALTOR. He or she can assist you in finding a home that matches both your financial needs and your lifestyle. Your REALTOR can also help you consider the pros and cons of different housing options. Some of those options include:
Single-family detached – which includes two-storey, bungalow…
●Semi-detached
●Townhouse
●Duplex
●Condominium
To condo or not to condo?
Condominium living is a great choice for people who don’t want the upkeep of a traditional home. Many first time buyers choose the condo option because it’s often far less expensive than a house meaning they can get into the housing market sooner. Also, condo living is ideal for “empty-nesters” or retirees who wish to downsize.
Keep in mind that in addition to your monthly mortgage payments and taxes, you will be required to pay a monthly maintenance fee. This fee is your share of owning and maintaining the common areas of the condo development.
Resale or new house?
Deciding to buy a brand new or resale home really depends on your preferences. Ask your REALTOR to help you weigh the benefits and drawbacks of each.
One advantage to a new home is that it’s likely more up-to-date and usually has larger room sizes and better storage. It also hasn’t been subjected to someone else’s decorating touches. The downside is you will need to put out extra cash for landscaping, fencing, window coverings and appliances.
With a resale home, you often get these additional features for little or no extra cost. Many resale homes have already been upgraded over the years to include expensive items like central air conditioning, finished basements, decks or even a pool. Buyers of resale homes are usually fortunate to be able to purchase these upgrades as part of the selling price.
Choosing the home that’s right for you is a matter of weighing your list of needs and wants against the benefits and drawbacks of the different housing choices available.
Whatever your choice, you’ll want to have a REALTOR on your side to ensure you make the smoothest move possible. For more information on buying a home and choosing a REALTOR, contact the Ontario Real Estate Association at 1-800-265-OREA (6732) and ask for your free copy of "How to buy your home."
http://www.alamq.com/index_files/homebuyingtips1.htm
With so many choices, how do you choose the type of home that’s right for you? Your first step should be to enlist the services of a REALTOR. He or she can assist you in finding a home that matches both your financial needs and your lifestyle. Your REALTOR can also help you consider the pros and cons of different housing options. Some of those options include:
Single-family detached – which includes two-storey, bungalow…
●Semi-detached
●Townhouse
●Duplex
●Condominium
To condo or not to condo?
Condominium living is a great choice for people who don’t want the upkeep of a traditional home. Many first time buyers choose the condo option because it’s often far less expensive than a house meaning they can get into the housing market sooner. Also, condo living is ideal for “empty-nesters” or retirees who wish to downsize.
Keep in mind that in addition to your monthly mortgage payments and taxes, you will be required to pay a monthly maintenance fee. This fee is your share of owning and maintaining the common areas of the condo development.
Resale or new house?
Deciding to buy a brand new or resale home really depends on your preferences. Ask your REALTOR to help you weigh the benefits and drawbacks of each.
One advantage to a new home is that it’s likely more up-to-date and usually has larger room sizes and better storage. It also hasn’t been subjected to someone else’s decorating touches. The downside is you will need to put out extra cash for landscaping, fencing, window coverings and appliances.
With a resale home, you often get these additional features for little or no extra cost. Many resale homes have already been upgraded over the years to include expensive items like central air conditioning, finished basements, decks or even a pool. Buyers of resale homes are usually fortunate to be able to purchase these upgrades as part of the selling price.
Choosing the home that’s right for you is a matter of weighing your list of needs and wants against the benefits and drawbacks of the different housing choices available.
Whatever your choice, you’ll want to have a REALTOR on your side to ensure you make the smoothest move possible. For more information on buying a home and choosing a REALTOR, contact the Ontario Real Estate Association at 1-800-265-OREA (6732) and ask for your free copy of "How to buy your home."
http://www.alamq.com/index_files/homebuyingtips1.htm
Is it time to “move up?”
Chances are when you bought your first home you were thinking of it as a “starter home” and dreamed of owning a larger and better home one day.
With today’s mortgage rates in the lowest range they’ve been for almost 30 years, you might be pleasantly surprised that you can afford that “move up” house now. Using the equity you’ve built up in your current home, your carrying charges may not be much larger than what you’ve been used to paying. If you’re curious to find out, ask a REALTOR to help you calculate carrying costs on a “move up” home.
There are many reasons why you may wish to have a larger home including a growing family, the desire to have more bedrooms so the kids can have their own space. Or maybe you want a larger yard, a garage or a home with a private driveway. Whatever your reasons, moving up to a new home can be very satisfying.
It’s also a smart move because the equity in your home will continue to grow and the value of a bigger and better home will be ultimately greater over time. As well, the pride of ownership in a bigger house will probably be even greater than you had when you bought your first home.
When you decide that moving up is the way to go, be sure to enlist the services of a REALTOR. Your options can be confusing at times, but a REALTOR can help you make the right choices.
He or she will help you determine the market value of your current home and therefore the price range you should be considering in a move up home. You’ll need to determine where you want to move. Do you want to stay in the same neighbourhood or move on? There are almost as many individual choices on location as there are homes. A REALTOR is skilled and knowledgeable in all aspects of a real estate transaction and can ensure you make a smooth move.
Moving up to meet your changing lifestyle and needs can be an exhilarating experience. Your home is probably the best investment you’ll ever make so why not take advantage of current market conditions and enhance your investment today.
http://www.alamq.com/index_files/homebuyingtips1.htm
With today’s mortgage rates in the lowest range they’ve been for almost 30 years, you might be pleasantly surprised that you can afford that “move up” house now. Using the equity you’ve built up in your current home, your carrying charges may not be much larger than what you’ve been used to paying. If you’re curious to find out, ask a REALTOR to help you calculate carrying costs on a “move up” home.
There are many reasons why you may wish to have a larger home including a growing family, the desire to have more bedrooms so the kids can have their own space. Or maybe you want a larger yard, a garage or a home with a private driveway. Whatever your reasons, moving up to a new home can be very satisfying.
It’s also a smart move because the equity in your home will continue to grow and the value of a bigger and better home will be ultimately greater over time. As well, the pride of ownership in a bigger house will probably be even greater than you had when you bought your first home.
When you decide that moving up is the way to go, be sure to enlist the services of a REALTOR. Your options can be confusing at times, but a REALTOR can help you make the right choices.
He or she will help you determine the market value of your current home and therefore the price range you should be considering in a move up home. You’ll need to determine where you want to move. Do you want to stay in the same neighbourhood or move on? There are almost as many individual choices on location as there are homes. A REALTOR is skilled and knowledgeable in all aspects of a real estate transaction and can ensure you make a smooth move.
Moving up to meet your changing lifestyle and needs can be an exhilarating experience. Your home is probably the best investment you’ll ever make so why not take advantage of current market conditions and enhance your investment today.
http://www.alamq.com/index_files/homebuyingtips1.htm
It's All About Resale - Selecting The Most Resaleable Location
So often when buying a home buyers don't look at the long term impact of location. The number one rule in real estate is location, location, location.
Location does not only apply to the city or area of the town where the home is located. The location of a home within a subdivision can play as big or bigger part when it comes to resale.
Homes located at the front of the subdivision or on the edges of the subdivision normally have a lower resale value than homes in the middle of a subdivision. They may look great when the subdivision is new but what about when the area is 10 years old? Here is what happens. The brand new subdivision is off by itself when it is new so being at the front or on the fringe edges is great. You have fewer neighbors and a greater feeling of space and freedom.
Invariably when you move into the front of a subdivision you will probably be one of the first owners. This means you will have to contend with the development of the rest of the neighborhood. Trucks and workers will be passing your home all day long. There will be nails, debris and trash everywhere, and constant traffic. This is will make it difficult to attract buyers should you need to sell. Also, it is possible that the road outside the subdivision may need to be widened at a future date. This can have a huge impact on your resell value.
Homes on the fringes of the subdivision look great when a subdivision is new. Often times the backyard backs up to undeveloped land which looks like a plus to the novice buyer. Then about three years after you buy your dream home developers decide to build an all night grocery store right behind your home. There goes the resale value.
When looking for a home, always consider the resale value of the location within the subdivision. Homes at the end of a cul-de-sac almost always sell faster and for more money. They are considered more desirable to potential buyers. Homes that are at least two streets from the main thoroughfare of the subdivision can produce the same results. Try to stay away from the front or edges of a subdivision unless there is a physical boundary that will prevent future development of that area like a lake or park.
Marsha Standifer has been in the real estate industry for more than 25 years. As a real estate consultant, she assists both buyers and sellers with all aspects of buying and selling real estate.
Article Source: http://EzineArticles.com/?expert=M._Standifer
The Best Investment
The Best Investment
As a fairly general rule, homes appreciate about five percent a year. Some years will be more, some less. The figure will vary from neighborhood to neighborhood, and region to region.
Five percent may not seem like that much at first. Stocks (at times) appreciate much more, and you could earn over six percent with the safest investment of all, treasury bonds.
But take a second look…
Presumably, if you bought a $200,000 house, you did not pay cash for the home. You got a mortgage, too. Suppose you put as much as twenty percent down – that would be an investment of $40,000.
At an appreciation rate of 5% annually, a $200,000 home would increase in value $10,000 during the first year. That means you earned $10,000 with an investment of $40,000. Your annual "return on investment" would be a whopping twenty-five percent.
Of course, you are making mortgage payments and paying property taxes, along with a couple of other costs. However, since the interest on your mortgage and your property taxes are both tax deductible, the government is essentially subsidizing your home purchase.
Your rate of return when buying a home is higher than most any other investment you could make.
If you are moving to a home for the first time, you are going to be very pleased with all the new space you have available. You may have to even buy more "stuff."
http://www.yourhousetohome.com/buying-selling-tips/the_best.html
As a fairly general rule, homes appreciate about five percent a year. Some years will be more, some less. The figure will vary from neighborhood to neighborhood, and region to region.
Five percent may not seem like that much at first. Stocks (at times) appreciate much more, and you could earn over six percent with the safest investment of all, treasury bonds.
But take a second look…
Presumably, if you bought a $200,000 house, you did not pay cash for the home. You got a mortgage, too. Suppose you put as much as twenty percent down – that would be an investment of $40,000.
At an appreciation rate of 5% annually, a $200,000 home would increase in value $10,000 during the first year. That means you earned $10,000 with an investment of $40,000. Your annual "return on investment" would be a whopping twenty-five percent.
Of course, you are making mortgage payments and paying property taxes, along with a couple of other costs. However, since the interest on your mortgage and your property taxes are both tax deductible, the government is essentially subsidizing your home purchase.
Your rate of return when buying a home is higher than most any other investment you could make.
If you are moving to a home for the first time, you are going to be very pleased with all the new space you have available. You may have to even buy more "stuff."
http://www.yourhousetohome.com/buying-selling-tips/the_best.html
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