Home ownership is a wonderful thing. It’s also outside of the financial means of many people.
Chances are if you can afford to rent a home, you can afford to pay the mortgage on a home of your own. One of the mistakes many people make is thinking of their dream home as a first home purchase. That might not be a realistic goal for the first time home buyer.
Think older. Think smaller. Think first home, not dream home, when you think about investing in your first piece of real estate.
Real estate is just that, an investment. It is the single largest investment most Americans make. Try setting aside your ultimate dream home dreams for a moment, and look at something simpler, smaller and more affordable as a starting point.
Everyone wants to live in a nice neighborhood, but what the prospective first time buyer might be wise to focus on is what’s called a turn-around neighborhood.
These are communities, usually of older homes, in which anywhere from one quarter to one half or more of the homes have been renovated. These are good places to look for a house because the prices of homes here will be substantially lower than in a new or completely renovated neighborhood. The house to look for is the one that needs some tender loving care, but not a complete structural overhaul.
Home renovation can be very costly, particularly when it comes to foundations, roofing, chimneys, plumbing and electrical. The ideal house for the first time buyer is one that is still structurally sound, but needs the kind of sprucing up that can be done without hiring a herd contractors or pulling permits.
This house might have a yard that sorely aches for maintenance or re-landscaping. It probably could use fresh paint inside and out. Chances are the kitchen hasn’t been renovated since it was originally built, and the bedrooms are likely small.
Remember, this isn’t the house you’ll spend the rest of your life in, unless you fall in love with it; it’s the house that will shelter you and help you build equity and good credit. Some day it may be your rental property.
Many older homes might not look like much compared to newer models, but they can and do serve as a starting place. Most older neighborhoods are also free of the additional financial burden of homeowner’s association dues.
If you have children, you’ll want to make sure the neighborhood and local school system meet your standards. One way to see if a neighborhood will be suitable for your lifestyle is to drive through it on a weekend evening, particularly in the summer.
Do this on your own, without a real estate agent. Are the streets quiet? Are children out playing in relative safety? Or have characters crawled out of the darkness that you’d rather your children never encounter? Neighborhoods can take on a different character at night; you’ll want to know what that character is like before you make a substantial investment in one.
See how many homes are in the process of renovation. The optimum time to buy in a turn-around neighborhood is when the turn-around begins to add value to the adjacent properties, and before it adds so much value that you’ll be asked to pay more than you’d like to.
There is a fine balance in such a neighborhood. Unless you can be positive that the value of a certain segment of town is going to increase, you don’t want to be the first person to commit to renovation. What if no one else follows your lead? Then you have a house whose property value is held down by the surrounding homes.
It’s also easier to get a home improvement loan if the lender can see the obvious potential in your home; something the neighborhood itself gives them. If you can point to five other houses in a mile radius that have sold for above-average prices after being remodeled, landscaped or otherwise cleaned up, you have a much better chance of interesting a lender in helping you with your home improvement projects.
With older homes, a thorough home inspection is a must. This is your chance as a buyer to find out exactly what you are getting yourself into, and to determine whether or not the house is right for you. Is there termite damage? Is the electrical system safe? Is the foundation sound? Does the roof leak? Is there mold damage? Professional inspection services provide this information as a part of the escrow process.
You’ll want to know as much as possible not only about the condition of the house, but about who will be responsible for fixing it, and who will foot the bill. Many repairs are the responsibility of the seller. Make sure you clearly understand what will be fixed, and what won’t.
Condominiums are another option for many taking the first time leap into home ownership. In exchange for association fees, there are amenities; the lawns are mowed by someone else, the pool is maintained by someone else, and so forth. You own only the interior space within the confines of your unit, but that interior space has a tangible monetary value.
Condos are generally less expensive to purchase than homes, but make sure to find out exactly what additional fees come with that purchase, and what restrictions apply to your residency. The amount of homeowners dues are often calculated based on the square footage of the individual units, and as such can vary widely. Make sure the rate you are quoted is the actual rate for the unit you are considering purchasing.
(Corina Roberts is a mobile Notary Public with eight years experience in the home mortgage and refinance field.)