Buying a home is one of the biggest, if not the biggest, financial decisions you will make in your life. when done well, it is often a quicker path to financial freedom and a great way to build wealth. As the events of the last few years in the real estate industry show, people sometimes forget about the tremendous financial responsibility of purchasing a home. Here are a few tips for dealing with the dollar signs so that you can make sure you invest wisely.
Get pre-approved. Save yourself the grief of looking at houses you can't afford by getting clear on your numbers in advance. This will also put yourself in a better position to make a serious offer when you do find the right house. By doing a thorough analysis of your actual spending power, you’ll be less likely to get in over your head or be disappointed when you have to switch gears and start looking at places within a more realistic price range after starting out too high.
Choose your mortgage lender well. A good lender can help you get creative about finding that sweet spot where you are comfortable with both the monthly payment and the out of pocket costs, or in some cases offer a lender credit to help cover some of your closing costs if you are short on out of pocket funds. They will also be easy to reach and responsive when you need then on short notice to get you a pre-approval letter to make an offer. If you plan to stay in the house for a long time, you will normally want to go with a 30 year fixed mortgage, but if this is a shorter term plan, getting an ARM may save you on the monthly payment.
Do your homework before bidding. Be sure you understand all the costs, not just principal and interest but also taxes, insurance, and HOA or condo fees. Owning a home can create some tax advantages so it is a good idea to check in with your accountant to find out how that pertains to your situation.