Money in the bank.
Start saving even before you're ready to buy a home. You'll need money for that whole down payment thing — at least a few grand. And once you buy, inevitably something will need repairing. If you pay for upkeep with credit cards it can end up costing much more in the long run.
Assemble your team.
Ask friends, co-workers and fellow cult members for recommendations on lenders and realtors. Mortgage lenders will let you know how big a home loan you qualify for. They'll also tell you which special programs you may be eligible for and how much you'll need for a down payment. A realtor is analogous to a jungle guide: They've been here before and know what will bite your butt if you don't watch it.
Home inspections are essential — and not cheap.
Home inspections usually run somewhere between $280 and $500. What does that buy you? Peace of mind, says Prudential realtor Virginia Hayes. "Home inspectors inspect the home's foundation, the roof, the electrical system, plumbing, heating and cooling, and the general condition of the property," Hayes says. Review the report with your realtor, but don't get too greedy with your "fix-it" list.
As Johnny Drama would say, "I'm buggin'-out!"
A termite inspection is de rigueur and runs around $85.
The Incredible Hulk factor.
Your monthly payment is going to be bigger than you think it will. Besides paying back the loan, home insurance and property taxes will also be escrowed into your bill. Depending on the home, the monthly swell can be $50-$100 or more. "People don't realize how much property taxes can change your monthly bill or how much they can change," says Elaine Worzala, director of Clemson University's Center for Real Estate Development. "Properties can be reassessed at the time of the sale. That can change your bill."
When it comes to assessments, "special" is not a good thing.
Say you buy a home and later on, the municipality decides to repair the sidewalk on your street. They have the right to special assets that area and recoup costs. "If you're not aware and don't have cushion cash set aside, you can get yourself into trouble on property taxes," Worzala says. "That's the first lien on any piece of property, the government has the right to seize your property and sell it for back taxes."
Welcome to the neighborhood.
Now give us some money. Some communities have homeowners' associations — with dues. Says Worzala: "You may not agree the pool needs a $10,000 upgrade, but if the board votes it in you can be special assessed. Some homeowners associates require you do landscaping, and if you don't keep up with that you can be fined."
To rent or to buy? That is the question
For young adults, there's more than one answer
By Matt Wake
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It's the American dream … no, not being Hugh Hefner. Owning a home. A juicy $8,000 first-time homebuyers tax credit and dropping interest rates can make that dream an eyebrow-raising opportunity. Right now.
So how do you know if the time is right for you to sign a mortgage? Being able to afford a down payment is one indicator.
"Homebuyers should have some investment in that property," says Clemson University Center for Real Estate Development Director Elaine Worzala. "An 80 (percent)-20 (percent) rule is realistic. That means both parties have something invested."
Yep, this is adult stuff. Buying superfluous things, like $300 high-heels or a stereo that sounds like gold, can be fun. But SunTrust mortgage broker Jay MacDonald says being financially responsible can accelerate your route to homeownership.
"If you are disciplined with your money, then you will have the ability to buy a home earlier in life," MacDonald says.
First National Bank of the South loan originator Chris Maxwell, 28, advises perspective homebuyers to err on the side of fiscal caution. After all, when you buy a house, if the water heater breaks or roof leaks, it's your problem. Not a landlord's.
"It's always going to be more expensive than you think it's going to be," Maxwell says.
"It's hard to plan for it other than setting up a budget and training yourself to stick to it every month."
Yes, the American dream can turn dark — if it's not the right time or fit for you. A paycheck-gobbling mortgage? The inability to relocate for greener pastures? Having to downgrade to domestic beer?
"Renting gives you flexibility," Worzala says. "Real estate is not a liquid asset."
That said, if you're employed with a company you strongly believe you'll be with five years plus, buying a home can make sense. And dollars. Otherwise, the assorted fees and expenses of buying a home, such as closing costs, can negate any economic boons of ownership.
Bottom line: you must be able to handle the monthly payments. When it comes to determining affordability, Worzala says to try to keep your monthly mortgage payment to 28 percent or less of your monthly income.
"When you start paying 50 or 60 percent for your housing, you start ruining your quality of life. Then there's no money to put food on the table, clothes on your back or gas in the car."
Signs buying a home is right for you…
• You can afford a down payment.
• You plan on staying in the same town for five or more years.
• Your monthly mortgage payment would be 28 percent or less of your monthly income.
