Monday, August 16, 2010

With a plan and a dose of flexibility you can find the right house for now and the future

Even if it doesn’t have everything you want now, good financial planning will help

Is now the right time to buy your first or next home? With interest rates low, prices at a fair level and many choices out there, the temptation is to jump into the real estate market. The question is how to decide what you can afford, what features are a must, and what would be great but not a necessity.

Even before you make a list of what you want and where you want it, the first consideration is: can you afford it? That’s non-negotiable. Consider long-term expenses, not just the up-front incentives that can dazzle a buyer. Over extending a budget for a few glitzy perks is a disaster in the making. The standard in financial planning is to spend no more than 35% of your pretax income on the mortgage, insurance and home insurance. You’ll also want to pay at least 20 percent down on the property and get a fixed-rate loan so you know exactly what your monthly payments will be.

The list
Here’s where you will detail, on paper, the type of home you want and the location. Be realistic about the positive and negative features and consider the long-term consequences of each feature. Think ahead. Don’t just buy a home for now, but consider the future. Resale value is an important factor, style can be an issue, plus room for children (and schools) and physical needs for aging parents who may move in.

Consider your purchase as a long-term investment, not a short-term gain. Now you have time to choose what you absolutely cannot do without, and what features are flexible. Most buyers won’t find everything they want at a price they can pay. So, if a swimming pool is on your list but the property you like doesn’t have one, putting a pool in is a goal for the future. Ditto for cosmetic things like countertops, bathroom spas and landscaping. While you may not have these up front by choosing a home with a mortgage you can manage, you’ll have the financial flexibility in the future.

With an organized home buying plan, you can minimize a great deal of the emotional impact. By determining your buying power, your wants and needs, and having an organized search plan, your chances of a stress-free experience are much better.

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