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Resources for Prospective Homeowners

Purchasing your first home is an exciting milestone in your life, but first-time homeowners often run into pitfalls that can often result in the overpayment of a home or discovering problems with the home at a later date.

Therefore, it is crucial that you learn about what can be negotiated when buying a home and why home inspections are such a vital part of the home buying process. Failing to obtain an inspection can potentially lead to a lot of problems later as inspectors will go over the home in depth to assess the value or the home and issues with the roof, foundation, building material and much more. When it comes to the purchase of a home, HUD homes that are offered by the Department of Housing and Urban Development (HUD) are a viable way to save money as these homes are often offered below market value. If you qualify for special savings programs, such as the Good Neighbor Next Door program, you could stand to save even more! To find more resources for prospective homeowners — review the information that has been provided within the sections below.

Advice for Buying Your First Home

If you are purchasing a home for the first time, it is important to be aware of common mistakes that first-time homebuyers make in order to avoid common pitfalls that could cost you further expenses. When purchasing a home, you should always first calculate your price range and there are three rules that you should follow in doing so. You should first consider your mortgage payment and what you can afford. Your mortgage payment should not exceed 28 percent of your monthly income. It is also recommended that your mortgage payment, mortgage interest, homeowners insurance and property taxes should not be more than 32 percent of your household’s monthly gross income. Finally, you should also consider other debts and monthly payments that you may have such as student loans, auto insurance and auto payments. If these payments exceed 40 percent of your monthly income, most lenders may not even grant you a loan until your other debts have been lowered.

While some lenders will grant you a loan even if your down payment is less than 20 percent of the home’s purchase price, it is not recommended that you offer a down payment that is less than that 20 percent. By doing so, you are likely to have higher mortgage rates and you would than end up paying far more for the home over time. It is better to plan ahead and save money each year until you can comfortably afford the down payment of a home. If you are looking at a $100,000 price range, than you should have at least $20,000 already saved up to put towards the purchase. It is best to work on your credit during this time in order to save money on your interest rate when you do apply for a loan.

It is also worth knowing that one mortgage lender is not like another. Each mortgage lender may have a different offer for your loan, so it is good for you to shop around in order to find the best lender for your price range. You may also qualify for federal assistance if you are a first-time homebuyer, including FHA-insured loans that can offer loans to individuals with lower credit scores or higher debt-to-income ratios.

What to Negotiate When Buying a Home

While it is common knowledge that you may be able to negotiate the price of the home, you can also negotiate other aspects during the buying process to help save you money. One often overlooked home negotiation comes in the form of the existing appliances. Appliances need not be listed within the purchase price of the home and if you would rather keep existing appliances, this is something that can be negotiated with the seller. Additionally, if you already have your own appliances, you can center some of your negotiations on the removal of existing appliances from the home.

The same negotiation tactics can be applied to existing furniture. While you may already have furniture of your own, consider the layout and color schemes of the home in order to decide whether or not your old furniture will fit the new space adequately. Negotiating on furniture is often seen as a win-win situation as, in some cases, the seller may then be diminishing their own moving costs.

If there are repairs that need to be done on the home, you can try to include the necessity of these repairs to be done prior to your closing date. Including the costs of repairs can save you a lot of money and hassle later on.

If you are apprehensive about the idea of making negotiations — do not be. As much as you may love a home, there are likely other homes that you are sure to love, and it is better to negotiate, especially when it comes to repairs, rather than make a bad purchase on a home out of fear that a seller may back out of a deal. However, time is of the essence. A great deal of sellers will find quick closing and faster negotiations to be part of an attractive bid as most sellers need the finances from closing in order to move into a new home of their own.

The Benefits of an HUD Home

Offered by the United States Department of Housing and Urban Development (HUD), HUD Homes are a great way for prospective home buyers to obtain the home of their dreams for a fraction of the cost. Generally set at a price that is well below market value, HUD homes become available after an FHA-insured mortgage is foreclosed upon. These homes are than sold by the HUD in hopes of regaining some of the financial loss that occurred during the foreclosure. While these homes are offered “as is” and do not include any sort of warranty, most HUD homes are still in excellent condition and require little to no work. They can be purchased from most areas and, in larger populated areas, you can generally find multiple HUD homes that are available at any given time. These one- to four-unit residential properties are first offered to homebuyers who intend to purchase a home as their primary residence before later becoming available to any buyer, including investors.

The Department of Housing and Urban Development (HUD) does not provide financing options to potential buyers, but can be paid for using personal finances or a qualifying home loan. The Federal Housing Administration (FHA), a division of the HUD, provides FHA-insured mortgages on these homes to first time homebuyers who meet income, credit scores and down payment amounts that are often far lower than other mortgage lenders.

Not only can you obtain an HUD home at a discount, but there are even greater discounts available to police officers, firefighters, emergency medical technicians (EMTs) and pre-kindergarten through 12th grade teachers. The Good Neighbor Next Door program offers qualifying buyer with up to 50 percent off of a HUD home’s list price in exchange for the commitment of living within the home as a sole form of residence for a minimum of three years. You can view property listings of HUD homes in your area either online through the HUD home store or through your mortgage lender.

Why Home Inspections are Important

Home inspections are a crucial part of the home buying process as it ensures that your investment into the home is a sound one. By hiring a professional home inspector, you will learn about any major repair issues that may need to be addressed, preferably before the closing date. Learning about major repair issues such as foundation or roofing issues can aid you in negotiations should you choose to pursue their inclusion in your offer.

A home inspection will generally take three or more hours and it is highly recommended that you are present for the inspection in order to see the issues that are uncovered first-hand. While you may be able to check for issues with the home that would need repaired on your own, only a home inspector will be able to perform a thorough inspection. Home inspectors will check for any issues related to:

  • Exteriors, including gutters, wiring, encroaching trees and paint condition.
  • The condition of the home’s roof.
  • The attic, including any sign of water damage, fire damage, pests or rodents.
  • The home’s foundation.
  • The home’s basement, including insulation and any signs of present or previous water damage.
  • Electrical systems.
  • Plumbing.
  • Appliances.
  • Heating and cooling systems.

It is worth knowing that a general home inspector will not check certain things such as the inside of walls, chimneys, pipes or sewage lines. If you would like to have a more thorough inspection, you have the option of hiring a specialist inspector.

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