FOCUS: 15 considerations before buying your first home

By Randy Brunson
Centurion Advisory Group

Brunson

SUWANEE, Ga.  |  Recently, we had the opportunity to visit with a young couple who are preparing to buy their first home. In the conversation, they asked for our input about how to approach buying their home. What should they be thinking about? How do they approach it? We offered the following.

1. Pick a geographic area which fits your lifestyle and relationship preferences.
2. Look for a home in your price range, which is the price that fits your cash flow.
3. Discuss and determine before you talk to Realtors what your ideal home looks like, and what you are prepared to settle for in a first home purchase, so the buy fits your cash flow. How many bedrooms do you want; ranch or two story? Big yard or not? 
4. During the property search and evaluation process, research property taxes and tax trends on homes you are considering.
5. Bring at least 20 percent of the purchase price to the closing table. This is so you can avoid Private Mortgage Insurance or PMI, which is insurance you pay for, but a payout goes to the lender if you default. It is a poor use of funds. You save big if you can avoid this, which is no help to you.
6. Choose to pay property taxes and homeowner’s insurance yourself out of pocket, rather than through your mortgage.
7. Also, look at the cost of homeowners insurance and whether the area you are considering is insured through a state pool or by commercial insurance carriers. This might save you money.
8. Once under contract, hire an inspector to look at the home for you, and give you a full report of the state of the property. Use the inspector’s findings to work with the seller to bring the home to your preferences or to code.
9. Investigate how well the home is insulated, how it is heated and cooled, and what costs and cost trends are for heating and cooling the home.
10. Determine the age of the heating and cooling systems, the water heater, and the roof.
11. Explore whether there have been any insurance claims on the property.
12. Choose not to be emotionally involved in the purchase of a particular home (this is a challenging element). Don’t pay more just because you really like the property.
13. In your household budget, allocate three percent or $3,000 per $100,000 of home value, to long-term maintenance, repair, and upkeep.
14. Take out no more than a 15-year mortgage. Paying a little more each month can significantly speed you having your home free and clear. And make it a fixed rate instead of variable rate mortgage, which can bite you when least expected.
15. Purchase price/cash flow ratios? To maintain cash flow margin in your household budget, keep principal, interest, taxes, and insurance (PITI) to no more than 20 percent of your gross annual cash flow – or income for most buyers. The three percent allocation to maintenance and upkeep will bring total housing costs to less than 25 percent.

Once in your new home, keep your home and yard neat and well-maintained, so that if you ever need to sell this home, you will be in good shape.

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