Four Steps to Minimize the Risk of Owning A Home

Four steps to minimize the risk of owning a home.
 
Years ago owning a home used to be considered a safe investment, but now it seems terrifying becuase of the damaged economy and flimsy housing market. Possible homeowners are now scared of making a commitment to such a large investment in fear of a mortgage disaster or buying a lemon. Here are four steps that will keep your confidence lifted when buying a home.
 
1. Stick with a fixed-rate mortgage- Even though fixed-rate mortgages are usually higher, they are gaurenteed to never change throughout the lifetime of your loan. This fixed rated eliminates the possible scary payment changes. Even though ARMs (Adjustable Rate Mortgages) are increasingly popular the interest rates are increasing. The rate was 9% in the fourth quarter of 2010, and jumped up to 12% in the first quarter of 2011. With a fixed-rate mortgage there is no fear of having your rates jump and trying to find extra money to pay your loan.  You don't have to live in an interest rate obsession for the next 15, 20, 30 years because a fixed-rate mortgage gives you the predictablility of what your monthly payment will be, and that is why it is the best plan.
2. Put - and keep - a home warranty in place- the transition from renter to homeowner is a tall order in the first time homeowners mind. There are a lot of concerns with responsiblity and appliance maintence. A home warranty plan kicks in when escrow closes, depending on your plan, and will cover your home against breakdowns of major appliances like a water heater. There are even upgradable plans for roof leaks and plumbing issues. Just call the warranty company when an item breaks down and they will repair or replace the item for you. If you talk with your agent you could even negotiate for the seller to pay for the first years cost of warranty. Also renewing your warranty is very important in order to keep a cap on your repair costs.
 3.Get repair bids and estimates, not just inspections- Once you have located a house and completed a contract, there is a contengency period ranging from 7-17 days which you can obtain all the inspections you want. The most common inspections are a general propety inspection, pest inspection, and roof inspection, but you may have more specialized ones if the property needs it. It gets tricky when all these inspections say your home needs repairs, but never tell how much it will cost. Talk with your agent to set up repair contractors to give bids on the work before the contingency period expires. This enables you to negotiate repair costs, and/or know what you're getting into cost wise.
4. Buy on the 10-year plan- When buying a home, only buy one that you can sustain the mortgage, buy at a price that is affordable to you and wont have to sell urgently for any reason. This step helps you plan for the future and not lose money on your home. This advice should make you ask yourself a few questions like, 'how many bedrooms do I plan to have? How much garage space will I need? Is this where I want to be located in the future?' This last step will be one to use for your future, which is where one should always be looking!

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