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First-Time Homebuyers “Rules of the Road”

posted by Stephen Katz @ 1:18 PM
Tuesday, May 7, 2013

Regarding residential real estate, certain “rules of the road” make sense and give homebuyers guidance. Here’s what I feel, are the most important rules to go by.

Location, Location, Location
This is the gold standard of real estate valuation. The most important attribute of any real estate is its location. Choose the location of your home wisely, after considering all the available information. Corner lot, flag lot, proximity to main highways, schools and shopping, suburban or urban – all of these factors greatly affect the value.

Buy for the Future
Buying and selling real estate is expensive. Selling expenses can easily grow to more then 12% of the sales price. If you think in less than five years you will need four bedrooms instead of three, or a three car garage instead of two, buy the bigger home now. In the long run, you will come out ahead in most markets.

New vs Used Home
For the first time homebuyer, generally the most significant reason to buy a used versus a new home is the leverage of home financing. Used homes with finished landscaping, yards, fences and window coverings allow one to finance these improvements in with the purchase price of the real estate and avoid future cash expenditures. As an example, in the used vs. new scenario, a used home with all completed improvements as mentioned above utilizing 100% financing can be acquired for closing costs and prepaid items only. The same new home with a zero down payment still requires anywhere from $10,000 to $20,000 in improvements and additions to offer the same utility and comfort as a fully finished used home.

Use Professional Assistance Unless You are the Professional
Choose your real estate and mortgage brokers wisely. They have years of experience helping others like yourself. They will save you time and money and can assist you in finding the right home and the right financing. Select a Realtor, a member of the National Association of Realtors (NAR), and a Mortgage Banker, a member of the Mortgage Bankers Association (MBA). Both associations require compliance with strict ethical and professional codes.

Always Get an Inspection
You are responsible for your own due diligence. Never waive inspections even on a new home. The builder could have skimped in the construction, used under-sized components or worse yet, hired incompetent sub-contractors. There are numerous examples of new homes which deviate significantly from plans or specifications. The requirement of inspections and testing is even more compelling for a used home.
Don’t rely on litigation to try to solve an obvious problem. Warranties are only as good as the builder or the warranty company.

Avoid Highly Stylized or Design and Architecture Fads
If you love the design of a geodesic dome home, don’t make it your first home and make sure you’ll never want to move again. If you are a frequent transferee, avoid buying the home with black and white checkerboard granite flooring and the velvet walls. If you stay mainstream, your next move will be both easier and faster.

Always Obtain Title Insurance
There is a reason why lenders always require a Mortgagee’s Policy of title insurance. A simple failure can cost them the entire amount of your loan. A buyer should always obtain an Owner’s Policy with ALTA 100 coverage to insure access. Unlike auto or home owner’s insurance, title insurance is just a one-time expense.

Avoid the Temptation to Buy the Biggest & Most Expensive
You can benefit from the appreciation and value gain that accompanies a smaller or standard sized dwelling. Misplaced or over the top improvements are generally penalized by the market, and sometimes severely, upon resale.

Stephen Katz

(770) 309-0939 (direct) or (866) 742-8400 -- For the past 18 years, Stephen Katz has built a successful business almost entirely on referrals. As your mortgage consultant throughout the home loan process, Stephen will explain the pros and cons of all available mortgage programs and help you choose the financing option that is best suited to your needs. Throughout the loan process, he will keep you informed and will respond quickly to your requests with answers and solutions. Consistently a top producer, Stephen is a Mortgage Bankers Association "Diamond" Award winner, a Georgia Mortgage "Top Gun" and has closed almost half a billion dollars in loans. Put his knowledge and experience to work for you!

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