After you determine your home buying budget, think about where you want to live. Are you going to stay in your current neighborhood, or do you want to start fresh?
With the first-time homebuyer federal income tax credit currently in effect, now is the perfect time to consider making that big purchase, your first home.
“Buying a home is one of the biggest financial commitments a person can make, but first-time homebuyers and qualified return buyers are in an ideal position to take advantage of unique opportunities in the market, such as low interest rates and the choice among an abundance of for sale homes,” said Charlie Young, president for ERA Real Estate.
But before you sign on the dotted line, here are some helpful tips to ease the transition into homeownership.
1. Learn about the first-time homebuyer federal income tax credit.
If you are considering purchasing your first home, or have not owned for at least three years, learn the parameters of the temporary first-time homebuyer tax credit, which is one of 10 provisions of the American Recovery and Reinvestment Act signed into law Feb. 17.
According to FederalHousingTaxCredit.com—a consumer Web site created by the National Association of Home Builders—for those who qualify and purchase before Dec. 1, 2009, the bill provides a tax credit of up to $8,000, calculated at 10 percent of the purchase price.
Unlike the previously available credit from 2008, the money does not have to be repaid, as long as the homebuyer does not resell the house for at least three years.
“The tax credit can help make the American dream of homeownership a reality for potential buyers who previously could not afford it,” Young said.
He adds that potential homebuyers should consult with a professional tax adviser for full details on how the tax credit may benefit them.
2. Calculate what you can afford
Before you start searching for your new home, know what you can afford. According to the U.S. Department of Housing and Urban Development, your total monthly mortgage payment—which includes principal, interest, taxes and insurance—should be about 29 percent of your monthly gross income.
What you can afford is also based on, among other things, how large of a down payment you can make and how much money you can borrow.
You can start estimating this figure by using an affordability or loan calculator found on the Internet. These calculators can help compute what may fit comfortably within your budget based on factors such as annual income, annual debts, interest rates and credit score.
Though Internet calculators and statistics are good references, it is recommended that you consult a financial adviser to determine exactly how much you can afford.
3. Choose a neighborhood.
After you determine your home buying budget, think about where you want to live. Are you going to stay in your current neighborhood, or do you want to hit the open road and start fresh?
No matter what, you should thoroughly research the demographics of the area.
Some additional factors to consider are how far you will be from work and shopping—and if you have children, do some careful research on schools.
4. Make a wish list of needs and wants.
Early in the home-searching process, list your basic needs, such as minimum square footage, number of bedrooms and bathrooms, location and, of course, the price you can afford.
Web sites of leading real estate brands should have guided property searches that allow you to choose one or more of these criteria.
If there are features that you would love to have in your home, but could live without, put them on your “want” list. This includes things like a pool, big yard and extra bedroom.
5. Work with an experienced real estate professional.
Searching for and purchasing your first home is exciting, but it can be overwhelming. To help each step in the home buying process run smoothly, consider working with a seasoned real estate professional.
Choosing a professional who is knowledgeable in your local and national markets, has access to the newest listings, and can help you negotiate prices, will increase the chances of finding your dream home.
To locate a real estate professional in your area and to learn more about home buying and the first-time homebuyer tax credit, visit ERA.com.
Courtesy of ARAcontent