This time last year, our family purchased a new home in Mountain’s Edge, a great community in the South West of Las Vegas. We were scouring the MLS for two months looking for a perfect place to call home for an expanding family. Our first contract was on a home a bit bigger than we…
When you’re looking to buy a home, you have many options. If you’re looking at a new construction home rather than a pre-existing one, you’ll be given an entire list of options, much like buying a new car. Many of these upgrades offered by builders are places for them to maximize their profits. By positioning themselves as a “one stop shop” they can make the process as simple as checking boxes with dollar signs next to them. The simplicity of saying ‘I’d like quartz counter tops, this tile flooring, these cabinets, etc’ can be alluring, but you’re trading your time for top-dollar prices on materials & labor.
How many smaller items do you purchase without shopping around? If you’re furnishing your home do you walk into a store & “say I need a couch”, take what ever they bring out to your car & pay what ever they’re asking? If you do, stop reading, I can’t help you. These upgrades, while much smaller in price than say a car, or a home itself, can add up very quickly. Perhaps you could assess the upgrades offered & select the ones most important to you, then buy the new home from a builder, and get multiple bids from quality contractors that can even do a better job, with better products, for less money. Doing this means you’ve added value to your home for less expense thereby creating net worth for yourself when it comes time to sell or refinance.
Now one more thing to keep in mind, is the idea of diminishing returns. Meaning …
If you’re like many people who just moved to a new area, or decided you’d like to stop making your landlord rich & start building some real wealth for your family, you may be getting excited about buying a home. You’ve got a lot of things to consider before you jump into a car & start looking at something you saw online.
Firstly, are you qualified to complete a purchase? If you haven’t spoken with a mortgage lender yet, you may be getting excited for nothing. Do you know what your credit score is, do you know what credit score you’ll need to secure a decent loan? How about a good loan? There are many ways to get an idea of your credit score & credit history if you’re just getting started. The easiest is by using a site such as CreditKarma.com. Keep in mind, nothing is truly free, your credit information is provided to you here in exchange for the ads offering you credit cards & other loans. Provided you can avoid any temptation to to get a card you don’t need (which may actually temporarily hurt your score, depending on your situation) you may be well served to keep an eye on your score & find ways to improve it before making a large purchase such as a home.
Once you know where your creditworthiness lies, it’s time to think about down payments & closing costs. Yes, you may be able to get an FHA loan with very little money down. Again, nothing is free, since March of 2013 this now comes with a PMI (private mortgage insurance) monthly fee that will now stay on your loan until it is paid off or refinanced. That being said, if you can get into a property in an area where appreciation will result in your equity growing substantially over the next few years, your ability to refinance out of the FHA into a conventional loan may happen more quickly than if you were just paying down 20% of what you bought it for.
For example, I buy a $100,000.00 house with 3.5% down My loan would be for $96,500.00 . In the first few years, most of your monthly payments are going to interest, not paying down the principle much. However if in a few years, appreciation has been good in the area, maybe my home is now worth …
