Preparing for Home Ownership
Whether your dream house is a charming Victorian on a tree-lined street or a sleek condo in town, buying a first home is one of life’s REALLY BIG events. Buying a home is also one of the biggest investments you’ll ever make, so you want to be sure you have all the information you’ll need to make wise decisions before you plunk down your down payment and sign on the dotted line.
Do your homework. Sign up for a class on buying a first home. To locate a class near you, look in the real estate section of your newspaper. Or check with your local vocational school or community college to see if they offer a class. A class will teach you the basics of purchasing a home, pitfalls to watch for, how to qualify for a mortgage, and the costs beyond the mortgage, like real estate taxes, mortgage insurance, and utilities. If you pay for the class, keep the receipt because it may be tax deductible if you itemize.
How much house can you afford? How much can you save for a down payment? Use our calculators to help you plan.
Understand the impact that real estate taxes will have on your ability to afford a home. For example, some cities provide tax-abatements in some urban neighborhoods to encourage home ownership and redevelopment. Since real estate taxes are a major expense after the mortgage payment, consider if that’s something you’d want to take advantage of. If you’re looking out in the suburbs, include the cost of commuting to work and how that will impact your overall budget.
Should you use a real estate agent?
There is no reason legal or otherwise that you must use an agent. However, there are advantages to relying on an agent in buying or selling a home. A real estate agent knows the process from start to finish and can serve as a valuable advisor whether you are buying or selling.
Since the seller pays the real estate broker’s commission, the buyer benefits from the expertise of a real estate agent with no direct "out of pocket" cost. The commission from the proceeds of the sale goes to the real estate agent (if buyer and seller used the same agent or real estate firm) or is split between the buyer’s agent and the seller’s agent. If buyer and seller are using the same agent, be sure to ask whose interests the agent is representing.
Some more advantages to using an agent:
Because most houses are listed through an agency, an agent can give you access to the vast listings of available properties, and guide you to those in your price range. While you can access the Multiple Listing Service online to help you narrow your search, a realtor often has advance notice of houses that are not listed yet.
A skilled real estate agent is experienced in negotiation and can help you work out a better price and other perks in your purchase. An agent can offer advice on choosing home inspectors, mortgage closing agents, and other professionals. By handling the hundreds of little details involved in buying or selling a home, an agent can save you a considerable amount of time. Last and certainly not least, it’s very important for you to choose an agent whom you trust and with whom you feel comfortable. You also want to find an agent who knows the area you’re interested in, understands your needs, has strong references from other clients, and has professional designations such as GRI (Graduate of the REALTORS© Institute) or CRS (Certified Residential Specialist). Ask friends and coworkers for names of agents whom they have used and liked.
Finally, here are a few questions to ask a prospective real estate agent:
- How long have you been in the business?
- What are your professional strengths?
- How many home sales did you participate in last year?
- What is the average selling price of the homes that you sold last year?