San Francisco Richmond ReView posted: " Buying Your First Home What should you consider before buying your first home? This is an extremely important question. For most people, this is the largest financial investment they will ever make in their lives. Buying a home can be extremely exciti" Richmond Review/Sunset Beacon
What should you consider before buying your first home? This is an extremely important question. For most people, this is the largest financial investment they will ever make in their lives. Buying a home can be extremely exciting and owning a home is still considered to be achieving the American Dream by many.
With the median priced single family home selling for about $1.45 million in San Francisco, this is a serious investment that requires you to carefully prepare and consider your choices before you make the jump into homeownership.
Can you afford to buy a home? The prices are high, but are lower than they were a couple of years ago. The interest rate is higher, but when the rates go down, you can refinance for a lower monthly payment. What is the worst that can happen if you take out a 30-year mortgage? You will have the home all paid for in 30 years and own the home free and clear. What is the alternative? Rent for the next 30 years and still do not own a home and lose the equity you could have had.
With the stock market hitting all-time highs, inflation under control, lower listing inventory and the Feds signaling its readiness to lower rates, signs are pointing to a real estate bottom – this might be a good entry point into the market.
When buying a home, there are a lot of costs, including the down payment, loan fees, title and escrow charges, moving expenses and furnishing the home. In addition, there will be ongoing expenses, such as the mortgage, property taxes, insurance and maintenance. Make sure that you have enough to pay for these and have long-term financial stability before making a commitment.
The method of financing is extremely important. I have been recommending 30-year fixed loans for a while, but with the interest rates poised to go down, it might be wise to get an adjustable or a 5-7 year fixed rate loan and refinance later as these have lower initial interest rates.
Homeownership is only a smart move if you plan on keeping the home for a while. I think that means a minimum of five years to ride through the up and down real estate cycle if you need to. There are so many costs associated with the purchase and sale of a home that it is next to impossible to come out ahead if you sell a short time after you purchase. You will also be unlikely to have built up any equity in your home since most of your mortgage payment initially will be going toward the interest on the loan, not the principal.
There is nothing wrong with renting if you want to stay flexible. Wait to buy a house until you are in a place where you want to put down roots. Once you have gotten to that point, then home ownership makes a lot of sense from a financial standpoint. Not only will you reap the benefits of appreciation over the years, but there are also tax advantages to owning a home. You will be able to write off the mortgage interest and property taxes on your federal and state income taxes, subject to certain restrictions. You will be able to realize up to $500,000 tax-free gain if you are married, or $250,000 if single, when you sell. Those who own a home are able to keep quite a bit more money in their pocket over time than renters can.
The other decisions when you are ready to purchase a home are whether to buy a single-family home, a condo or a multi-unit property to help with the mortgage. Do you need a home that is all fixed up or would you prefer to buy a fixer upper and put some sweat equity into it to build up value? What amenities and features are important to you?
Do you need a home that is close to work to minimize the commute? Do you need to be close to public transit? How about the school district for your children? Is a community important to you? Do you want to be close to shops, restaurants and other conveniences? How much outdoor space do you need?
As you can see, making the decision to purchase is only the first step. Implementing that decision will require much more work and guidance. When you're ready to buy, I suggest you work with a competent real estate agent, lender, accountant and perhaps an attorney if necessary to develop a plan for execution.
Finding the perfect home can be exciting and rewarding with the right team in place and will provide long-term financial security for you and your family.
John M. Lee is a broker with Compass specializing in the Richmond and Sunset districts. If you have any real estate questions, call him at 415-465-0505 or email at johnlee@isellsf.com.
No comments:
Post a Comment