Real Estate 101
Real estate investing can be one of the best opportunities for building wealth. If you do it right. To help you avoid costly mistakes, here are the fundamentals of buying a home.
Know how much you can really afford. Realtors and lenders may entice you into maxing out your house budget based on your income. However, that doesn’t take into account your actual, real life, be-honest-with-yourself spending habits. Never go higher than 40% of your take-home!
Before you start looking, get your finances in order. Fix your credit, have enough saved for a down payment, get prequalified, and get pre-approved. Understand the budget implications of different mortgage types and down payment requirements. Don’t sign anything you don’t understand!
Only work with an agent who’s working for your benefit. Clearly communicate what you want and need, and what you can live with. Throw out the “keeping up with the Joneses mentality.” Buy for YOU, not for appearances! Do your due diligence about the neighborhood and the builder and be realistic about the life experience you’re going to have in this house.
Don’t let your emotions make an offer on a house that will drain you. Know what you can afford, and what the house needs to make it a home (if it’s a fixer-upper, can you afford to do the work?). Make a realistic offer based on the condition of the home, the market, and your budget.
Ask questions until you’re clear on what you’re buying! Know what’s involved in making this house your home and put everything in writing: inclusions, exclusions, and expectations (what the seller will fix, what agree to buy as-is, etc.).
My biggest takeaway? “Know your budget!”
Buying your first home is a huge step toward wealth in real estate. For more in-depth information on buying a home - including the loan approval process, mortgage types, down payments, tax implications of homeownership, and insurance, check out my latest Financial Fed Friday video below!