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Home Buying Process >> What to Avoid >> Buying Your First Home
5 Tips for Buying Your First Home
by Adam VanBuskirk
When buying your first home, it is easy to get overwhelmed or feel like the financial decisions are out of your control.
Unless you are a real estate junkie like me, you may not be highly educated in real estate finance or inspecting homes; actually, I'm not either.
Regardless, buying a home is actually quite simple. You just have to educate yourself on the basics, so that you can keep the professionals that will help you along the way in order. With that said, below are five tips to get the education process started.
1.) Avoid Pre-payment Penalties - Avoid these at all costs; period! A pre-payment penalty on a mortgage means that if you purchase the home and then want to sell it before your mortgage balance is due; you will have to pay a penalty for paying off the mortgage early. There are many great loans out there that do not have pre-payment penalties, so if you encounter one that does, walk away.
2.) Avoid ARMs with Negative Amortization - To get a complete understanding of this statement, refer to my article "Beware of Negative Amortization when Using ARMs to Purchase Property." In short, a good ARM will have an interest rate and monthly payment that adjust at exactly the same time. This ensures that the interest rate doesn't adjust more frequently then the monthly payment, leaving unpaid interest that gets reflected on your loan balance.
3.) Get Pre-Approved - Getting pre-approved lets the seller know that you're a serious buyer, and will often give you the edge if there are multiple parties interested in purchasing the home. In addition, getting pre-approved saves you tons of time. You wont waste your time inspecting the home, trying to work out the loan details, or working with the seller on a price if you know that you cannot get a loan.
4.) Know what you can Afford - This sounds like the simplest tip, but is far from it. Most people don't maintain a personal budget or balance sheet, leaving them with little clue of how much they can actually afford. If you are one of these people, set down and right down all of your personal expenses and incomes. Then, use the net income from those two figures to help you produce a number that you personally feel comfortable with for purchasing a home.
5.) Avoid (100% +) Home Equity Loans - This tip is for those that have already purchased their home or were given a home from a relative. If you get into financial trouble or need some cash, it can be very tempting to take a home equity loan that amounts to more than your home is worth. Don't ever do this! There are other ways to clean up personal debt problems without putting your home in jeopardy of foreclosure.
There are many other concerns that arise when you are buying your first home, such as, PMI (Private Mortgage Insurance), special loan programs for first-time home buyers, 80/20 financing to avoid PMI, using a fixed-rate or adjustable-rate mortgage, and many others. This list has only touched the surface of what you will need to know, but it's a start in the right direction.
The author is the founder and owner of ManageYourRentals.com
Article Source: http://EzineArticles.com/?expert=Adam_VanBuskirk
