Posts Tagged ‘home’

Daily ProsperiTIP

Hire a qualified home inspector before you purchase a home. Any seasoned realtor will strongly advise this, but I’ve witnessed people working without a professional who skip this step to save a few dollars.

Don’t make that mistake.

When my husband and I were searching for our first home, we fell in love with a sweet little house. During the inspection it was revealed that its foundation was completely collapsing!

A house could be filled with mold, have water damage, leaky pipes, a furnace that’s about to go kaput…and many other problems you might not catch—mostly because you’re too in love with your potential new home to notice the flaws. Even if you’re skilled at real estate, it’s valuable to have another set of professional eyes.

Tip: Don’t send the home inspector to the property alone and settle for reading the report later. If at all possible, accompany her/him through the property. Often they’ll point out valuable information that never makes it into the report. You’ll also be able to read nuances from the inspector about which problems should be fixed immediately which can wait.

From the Mailbag

I’m thinking of buying my first home! One quick question: how do I decide between a 15 and 30 year loan?

Gary

Congratulations, Gary! That’s a big step, and I’m happy to help you with this huge question. For most people, taking on a mortgage is the largest debt they’ll ever owe. It’s important to do it right.

I’ve noticed some advisors like one type of mortgage better than another. I think each type exists for a specific reason. Unfortunately, this means I won’t be able to answer your question directly, but I can give you some tips to help along the way:

First, you didn’t ask about adjustable rate mortgages–where the initial interest rate is low but can adjust to a higher amount after a specified period of time–but for the vast majority of people, they aren’t a great idea right now. Interest rates are at near all-time lows, so locking into a fixed rate mortgage is best for most home buyers. The exception? If you are absolutely certain you’re going to move again soon, an adjustable rate will save you money.

15 year loans are best for people who want to pay off their mortgage quickly and need the forced discipline of a larger payment. The upside of a 15 year loan is that you’re guaranteed to be mortgage-free in 15 years (assuming you remain in the home). The downside? If you lose your source of income, the monthly payment on a 15 year mortgage will be much harder to meet than a 30 year payment.

30 year loans work best for people who want the flexibility of a lower mandatory house payment. It’s a mistake to think that people with 30 year loans will pay them off over a long period of time. On the contrary, I’ve met quite a few successful savers who chose a 30 year loan and then paid significantly more than the amount due each month. Why? If they ran into financial trouble, their monthly payment was pretty low, and the chances they could meet the payment was better than if they’d bitten off the higher 15 year payment.

Don’t take out the 30 year loan and “hope” to make extra payments. Set up an automatic payment plan for more than the requested amount so that you’re still forced to pay your home off early.

I hope this helps and I wish you happy house hunting! Send us a picture! 🙂

From the Mailbag

I want to sell my house. With all of the foreclosures, is this actually a good time to be in the real estate market?
-Sherry

This is a tough question Sherry. Sadly,  there isn’t a great answer. If someone absolutely loves your home, they may overpay, even in this economy.  Wouldn’t that be great?

I will give you three points to consider when deciding whether to sell in this market:

  1. Are you upgrading to a larger/more expensive home or downsizing? Here’s why this is an important factor to consider:  there is a good chance that if your home has slipped in value, so has the home you’re about to purchase. If the properties are in similar markets, you’ll lose some money on your current home but will then save a bundle of money on the new property. If you’re about to spend more money by upgrading, this works in your favor. When downsizing, you’ll lose more on your current home than you will on the one you purchase.
  2. Why are you moving? Interest rates are low. If you’re moving because you can’t afford the house payment, will a simple refinance work? Would there be ways to take advantage of the interest rate climate that involve less upheaval?
  3. My friends who are real estate pros tell me that there is no single “housing market.” There are thousands of little markets. How do your current and prospective markets compare? If your market is depressed but the area you’re moving toward is still booming, maybe this isn’t a great time to sell. If the area you’re moving to is depressed, but yours is holding up well, you may find a steal.

Selling a home is a difficult decision because real estate is usually the most expensive item on a person’s net worth statement. Take your time to make a good decision you’ll be happy with—because you’ll literally live in it!

The Great Home Debate

Popular wisdom says that you should purchase a home. Have you ever been to a party of homeowners and told someone you rent? It’s not uncommon to hear people mumble that you’re “throwing money away” and not “building equity” through mortgage payments. Because you don’t own a home you’re cast aside as some sort of second-class citizen.

Here’s the million-dollar question: should a creative individual buy or rent a home?

I think you’ll be surprised by my answer.

The issue of buy vs. rent is especially difficult because the creative community is a varied bunch. Although it’s unfair to stereotype a group of people as large as ours, I think we can agree that many of us are wandering hearts. We create for many reasons, but it takes a person comfortable with exploring unfamiliar territory to do what many of us do. A home ties us down, and that may work against our goal as artists.

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