buying a house http://www.wisebread.com/taxonomy/term/821/all en-US How to Evaluate a Neighborhood Before You Buy http://www.wisebread.com/how-to-evaluate-a-neighborhood-before-you-buy <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-evaluate-a-neighborhood-before-you-buy" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="/files/fruganomics/imagecache/250w/blog-images/fence-194025-small.jpg" alt="neighbor" title="neighbor" class="imagecache imagecache-250w" width="250" height="185" /></a> </div> </div> </div> <p>When it comes to buying a home, the old real estate saying holds true. It's all about &quot;location, location, location.&quot;</p> <p>The neighborhood you live in can make a big difference in whether or not you enjoy your home. You can have a great house, but if you don't like the neighborhood, living there can be unpleasant. (See also: <a href="http://www.wisebread.com/think-you-can-afford-more-house-in-the-exurbs-think-again">Think You Can Afford More House in the Exurbs? Think Again</a>)</p> <p>Our next door neighbors are finding this out for themselves. When they moved in three years ago, they liked the house and the large yard. However, they are an older couple, and our neighborhood is full of starter families and <a href="http://www.wisebread.com/how-big-of-a-house-do-you-really-need">starter homes</a>. They were annoyed with all of the young children running around and the frequent family events and get-togethers. They've moved out, and the house hasn't even sold yet.</p> <p>Before you move in, take the time to evaluate the neighborhood, getting an idea of whether or not you will feel comfortable there. Here are some things to consider as you choose a location.</p> <h2>Schools</h2> <p>This is one of the biggest concerns that many homebuyers have. And why not? Do you want your child to attend a good school? One of the things I like about my son's school is that the test scores are great, and there is a lot of funding for at-risk children. The result is that his class sizes are small for our area, and there is a great enrichment program for him.</p> <p>Even if you don't have children, or if you decide to homeschool your children, it can still be a plus to have good schools nearby if you are looking for resale value. Chances are that whoever buys the house from you will want to know about the schools.</p> <p>You can evaluate schools by checking <a href="http://www.greatschools.org/">GreatSchools.org</a>, and even by visiting the school. If you are really serious about it, attend a PTA meeting, or meet with the school's principal for a tour. Most of the time, this can be arranged, and you can see what resources are available, as well as what kind of parental support you see in the schools.</p> <p>If you are unsatisfied with the more traditional school, you can find out about nearby charter schools and private schools.</p> <h2>Strike Up a Conversation</h2> <p>Nothing gives you the feel of a neighborhood like talking to your potential neighbors. If you see someone outside while you are looking at the house, don't be afraid to ask questions. You don't even need to get into an in-depth conversation. Wave and say, &quot;hi,&quot; and see if the neighbors wave back.</p> <p>Spend a few minutes observing the people and talking to a few of the residents. Are there children for your kids to play with? Does it look like the neighbors get along with each other?</p> <p>You'll get a good idea of what to expect and a feel for whether or not you &quot;belong.&quot; While I don't always feel like I belong in my neighborhood, everyone is nice, and my son has friends to play with &mdash; one of them is exactly his age and right across the street.</p> <h2>Watch for Negative Signs, Too</h2> <p>Pay attention to signs that the neighborhood could be headed for trouble. While there are one or two houses in my neighborhood that have unkempt yards, most of the homes are <a href="http://www.wisebread.com/home-improvements-that-pay-off">neat and well-cared for</a>. The grass is trimmed, flower beds are attractive, and most of the neighbors clear their sidewalks during the winter. These are signs that your potential neighbors take pride in their area and that they care for their things.</p> <p>Also, watch for an abundance of &quot;For Sale&quot; signs. A <a href="http://www.wisebread.com/quick-tip-how-to-sell-your-home-when-your-neighbors-are-too">lot of For Sale signs</a> can be an indication that the neighborhood is struggling. However, it's not the end of the world if there are a lot of homes for sale. Since I live in a starter neighborhood, there are several homes on the market as families, after five or six years, have decided to upgrade. You can look for indications that the home is well-cared for, even though it is for sale. A foreclosure/real estate owned property is likely to look a little shabby. If there are a lot of foreclosure properties in the neighborhood, that's a real red flag.</p> <h2>What's Nearby?</h2> <p>Don't forget to consider nearby amenities. Consider what you value in your lifestyle. Do you like to walk? If so, look for a neighborhood near shopping and restaurants. My husband likes privacy, so we looked for a neighborhood a little outside of the main part of the town with reasonably large yards and a quieter feel.</p> <p>Others, though, prefer to be right in the middle of it all, close to dining, shopping, and entertainment. We like to go out enough that we didn't want to go full-on rural. Instead, we are in a semi-rural neighborhood that is about 15 minutes from the things we like to do. It makes sense for us, and, even though I wish there was better public transportation near our house, we're reasonably happy with the location.</p> <p>You can use tools like <a href="http://www.walkscore.com/">WalkScore</a> to get an idea of what is close to your potential neighborhood. WalkScore helps you figure out what's close in terms of schools, activities, dining, shopping, and entertainment. You can see whether it makes sense to bike or walk, and whether there is public transportation nearby.</p> <p>I am painfully aware that the WalkScore for my neighborhood is 8. That's the one thing I'd change about my neighborhood; I'd like a little better access to amenities.</p> <h2>Bottom Line</h2> <p>Currently, I'm faced with the possibility of moving in the next 12 months or so. I've been thinking about what I want in a neighborhood and how to evaluate what I find. Before you buy, think about the things that would make a neighborhood a pleasant place for you to live. Then, do a little research on communities in your target location.</p> <p>Finally, take the time to visit neighborhoods in the area. All the data in the world can't replace the actual gut feeling you get when you drive through a neighborhood and receive a first impression about how you might function as part of the community.</p> <p><em>Did you research your neighborhood before you bought or rented there? What tools or resources did you use?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/miranda-marquit">Miranda Marquit</a> of <a href="http://www.wisebread.com/how-to-evaluate-a-neighborhood-before-you-buy">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/quiz-am-i-really-ready-to-buy-a-home">Quiz: Am I Really Ready to Buy a Home?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-ways-to-boost-your-neighborhood-and-your-homes-value">8 Ways to Boost Your Neighborhood and Your Home&#039;s Value</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/buy-a-home-you-can-afford-with-the-mortgage-suitcase-trick">Buy a Home You Can Afford With the Mortgage Suitcase Trick</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-process-for-purchasing-a-house-with-cash">The Process for Purchasing a House With Cash</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-costly-things-new-homeowners-dont-prepare-for">9 Costly Things New Homeowners Don&#039;t Prepare For</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing buying a house first time home buyer neighborhoods neighbors Wed, 29 May 2013 10:24:31 +0000 Miranda Marquit 976251 at http://www.wisebread.com What to Look for in a Fixer-Upper http://www.wisebread.com/what-to-look-for-in-a-fixer-upper <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-to-look-for-in-a-fixer-upper" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="/files/fruganomics/imagecache/250w/blog-images/3139490667_aafe34aa01_z.jpg" alt="fixer upper" title="fixer upper" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>The housing market is definitely improving, and many of my friends are looking to purchase a new house. The problem is that in many areas inventory is quite low, and it is getting difficult to snatch a perfect house at a great price. However, if buyers are willing to put in some time and work, they are still able to find fixer-uppers that are worthwhile. Here are some tips on what to look for in a fixer-upper. (See also: <a href="http://www.wisebread.com/9-costly-things-new-homeowners-dont-prepare-for">9 Costly Things New Homeowners Don't Prepare For</a>)</p> <h2>Location</h2> <p>Location is extremely important in choosing a house. It is better to buy a fixer-upper in a nice neighborhood rather than a pristine and perfect house in a war zone area riddled with crime. Generally, houses in nicer neighborhoods have greater value to begin with, and whatever improvements you make will give you more return on your money. You should also look at the neighbors' houses on the same street and see how much you need to improve the house to make it fit in.</p> <h2>Age of House</h2> <p>Generally, newer homes have certain features that are more updated. For example, plumbing and electrical systems are usually better, and newer homes are up-to-date with modern building codes. From what I've seen, newer homes also have better insulation and are more <a href="http://www.wisebread.com/what-americans-can-learn-from-how-the-rest-of-the-world-saves-energy">energy efficient</a>. These features may not be so visible, but they can be very expensive for you to fix. If you do buy an older home, you should check if these major systems have been updated. If you need to upgrade a house's infrastructure to comply with current laws or insurance requirements, then it can be quite expensive.</p> <h2>Costs and Savings</h2> <p>One reason to buy a fixer-upper is to save a little bit of money. To do that you need to assess how much the repairs will cost and have a reserve fund of cash to pay for those fixes. You should definitely get a professional home inspection and also estimate how much cosmetic repairs would cost. If there are major structural issues that cost tens of thousands of dollars to fix, it may not be worthwhile to purchase the house.</p> <p>The <a href="http://www.wisebread.com/home-improvements-that-pay-off">fixes that get you the most bang for the buck</a> are really the cosmetic ones, and that is why the best fixer-uppers are the ones that have great &quot;guts and bones&quot; but need a fresh coat of paint and some new flooring. The cost of paint and flooring is usually pretty easy to figure out, but major structural changes to the foundation and walls may become a real money pit.</p> <h2>Your Time</h2> <p>If you want to deal with a fixer-upper, then you really need to figure out how much time you have to devote to it. If you don't do the work yourself, then you will need to research which contractors to use, and for cosmetic changes you will need to pick out all the colors and styles. Depending on how much work there is to be done, it may take weeks to months before you can actually move into the house.</p> <p>Some people love customizing their homes, but some really just want a move-in-ready house. If you do not have a lot of time to deal with a project, then it might be better to just pay a little more for a pristine house.</p> <p>While the <a href="http://www.wisebread.com/the-housing-market-is-finally-rebounding">market is tightening</a>, I think that it is still possible to get a deal on fixer uppers if you are willing to do the research and follow up work. However, it may not be a great idea for those who do not have a decent cash reserve and the time to do the legwork. I've only purchased houses that needed cosmetic fixes, and that is because I don't have a lot of time and money to devote to major fixer uppers.</p> <p>One last consideration &mdash; it is better to get a house at a lower price because your tax basis will be lower, and that may save you money for many years to come.</p> <p><em>Have you purchased a fixer upper?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/xin-lu">Xin Lu</a> of <a href="http://www.wisebread.com/what-to-look-for-in-a-fixer-upper">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-costly-things-new-homeowners-dont-prepare-for">9 Costly Things New Homeowners Don&#039;t Prepare For</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-process-for-purchasing-a-house-with-cash">The Process for Purchasing a House With Cash</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-cost-of-a-free-ride-why-not-to-use-a-buyers-agent-submitted-by-ken-rick">The cost of a free ride - why not to use a buyer&#039;s agent</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/quiz-am-i-really-ready-to-buy-a-home">Quiz: Am I Really Ready to Buy a Home?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/renting-is-cheaper">Renting is cheaper</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing buying a house fixer upper home improvement Tue, 01 Jan 2013 10:30:20 +0000 Xin Lu 961639 at http://www.wisebread.com Buy a Home You Can Afford With the Mortgage Suitcase Trick http://www.wisebread.com/buy-a-home-you-can-afford-with-the-mortgage-suitcase-trick <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/buy-a-home-you-can-afford-with-the-mortgage-suitcase-trick" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="/files/fruganomics/imagecache/250w/blog-images/2921978502_7a0f8414c8_z.jpg" alt="house" title="house" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>Raise your hand if you&rsquo;ve ever tried to stuff more than you really need into a suitcase. You begin with good intentions, wanting to make sure you have everything you need for your trip. You don&rsquo;t really know if you&rsquo;re going to need that extra sweatshirt, but you throw it in just in case. Before you know it you&rsquo;re sitting on the lid of your overflowing suitcase just to get it closed. Although you&rsquo;re finally able to zip it up, the real bummer is that you have to drag around that heavy suitcase your whole trip.</p> <p>Unfortunately, this scenario of trying to stuff in more than you really need isn&rsquo;t just limited to packing your bags. When buying a home, it&rsquo;s easy to convince ourselves to buy more than we need even though it stretches our budget. As a result we end up dragging around tens of thousands of extra mortgage debt for the life of our 15-30 year loan.</p> <p>The mortgage suitcase trick is simple and can help you avoid buying too much home. Picture your housing budget as a suitcase. Every time you think about adding another feature or upgrade during your home buying decision, ask yourself if you really want to lug around the cost of that feature for the next 15-30 years.</p> <p>While the mental image of a heavy suitcase busting at the seams can be an overspending deterrent, I know sometimes it helps to have more concrete guidelines. So here are four tips that can help you avoid overloading your mortgage suitcase. (See also: <a href="http://www.wisebread.com/quiz-am-i-really-ready-to-buy-a-home">Quiz: Am I Really Ready to Buy a Home?</a>)</p> <h2>1. Know Your Limits</h2> <p>Before you even start looking at homes figure out <a href="http://moneysmartlife.com/how-much-house-can-you-afford/" target="_blank">how much house you can afford</a>. Just because you&rsquo;re pre-approved for a certain amount doesn&rsquo;t mean you have to spend that much or that you can really afford it.&nbsp;</p> <p>It helps to run through some &ldquo;what-if&rdquo; scenarios to future-test the limit you decide on. What if one person decides they want to stay at home with the kids? What if you lose your job for six months? Whether you&rsquo;re looking at a <a href="http://moneysmartlife.com/30-year-mortgage-vs-15-year-mortgage/" target="_blank">15 or 30 year loan</a>, a lot can change in your life during that time, so try to take that into account.</p> <h2>2. Define Your Priorities</h2> <p>There are many different factors that come into play when you&rsquo;re trying to find the right place to live. Chances are you&rsquo;re not going to be able to get everything you want in a home, so it helps to prioritize what is most important to you.</p> <p>This list will come in really handy when you&rsquo;re comparing multiple properties and having a tough time choosing which you want and how much money to offer the owner.</p> <h2>3. Don&rsquo;t Shop Up</h2> <p>My wife likes to watch these house-hunter shows that start with the potential buyer listing off everything they&rsquo;re looking for and what they want to spend. Many times the real estate agent will tell them they can&rsquo;t get everything they want at the price they&rsquo;ve set and will proceed to show them <a href="http://www.wisebread.com/how-big-of-a-house-do-you-really-need">more expensive homes</a>.</p> <p>Once you see the home that meets all your criteria, you&rsquo;re going to want it. However, if you can&rsquo;t afford it then, you&rsquo;re just making yourself unhappy by looking at it. Two unfortunate scenarios often result from shopping up:</p> <ol type="1" start="1"> <li>Your emotions overcome logic, and you&rsquo;ll break your budget to buy the home.</li> <li>You don&rsquo;t buy it but &ldquo;settle&rdquo; for less and are unhappy with the home you buy.</li> </ol> <h2>4. Beware Payment Justification</h2> <p>When you&rsquo;re going through the process of buying a home, most everyone involved will be happy to tell you that a more expensive property &ldquo;only raises your monthly payment by a little.&rdquo; Your realtor wants you to buy. Your bank is probably happy to lend you more. Sometimes your spouse/partner/friend will even jump on board and argue the case that another $20-30K doesn&rsquo;t raise your payments that much.</p> <p>If you&rsquo;ve done steps #1 and #2, then you&rsquo;ll know what you can afford and what&rsquo;s important to you. Don&rsquo;t <a href="http://www.wisebread.com/friends-and-goals-dont-let-a-blue-falcon-bring-you-down">let other people talk you into spending more</a> than you&rsquo;re comfortable with. You&rsquo;re the one who has to get out of bed and go into work every day for the next 20 years to pay off the mortgage.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ben-edwards">Ben Edwards</a> of <a href="http://www.wisebread.com/buy-a-home-you-can-afford-with-the-mortgage-suitcase-trick">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/quiz-am-i-really-ready-to-buy-a-home">Quiz: Am I Really Ready to Buy a Home?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/you-shouldn-t-buy-a-home-if">You Shouldn’t Buy a Home If…</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-evaluate-a-neighborhood-before-you-buy">How to Evaluate a Neighborhood Before You Buy</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-process-for-purchasing-a-house-with-cash">The Process for Purchasing a House With Cash</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-costly-things-new-homeowners-dont-prepare-for">9 Costly Things New Homeowners Don&#039;t Prepare For</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing buying a house first time home buyer home mortgage small houses Mon, 26 Nov 2012 10:36:38 +0000 Ben Edwards 955494 at http://www.wisebread.com Quiz: Am I Really Ready to Buy a Home? http://www.wisebread.com/quiz-am-i-really-ready-to-buy-a-home <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/quiz-am-i-really-ready-to-buy-a-home" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="/files/fruganomics/imagecache/250w/blog-images/6037999486_531d422d5d_z.jpg" alt="couple on a car" title="couple on a car" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>Home prices are on the uptick for the first time in several years, which means that you may have a limited window of opportunity to become a homeowner before prices shoot through the proverbial roof again.</p> <p>I don&rsquo;t have to tell you that buying a home is serious business, a major milestone, a huge responsibility, and probably the largest purchase you&rsquo;ll ever make, but are you asking yourself the right questions to make sure that you&rsquo;re prepared for all the amazing and not-so-amazing aspects of home ownership? (See also: <a href="http://www.wisebread.com/9-costly-things-new-homeowners-dont-prepare-for">9 Costly Things New Homeowners Don't Prepare For</a>)</p> <p>To help you decide whether you&rsquo;re ready or not, I&rsquo;ve designed this quick quiz. Answers are below. No cheating!</p> <p><strong>1. When contemplating the decision to buy a home, what&rsquo;s the first thing you should do?</strong></p> <ol type="A"> <li>Contact a loan officer</li> <li>Take a good look at your finances</li> <li>Call a real estate agent</li> <li>Attend a few open houses</li> </ol> <p><strong>2. When you start looking for the perfect home, what should you have?</strong></p> <ol type="A"> <li>Cash for a down payment</li> <li>A good credit score</li> <li>A steady source of income</li> <li>All of the above</li> </ol> <p><strong>3. What&rsquo;s the best way to calculate the price range in which you should be shopping for a home?</strong></p> <ol type="A"> <li>Your anticipated monthly payment is 30% of your income, to include your mortgage, taxes, and insurance fees</li> <li>Add up all your assets, and work with 50% of the sum</li> <li>Multiply your current rent by three</li> <li>Multiply your annual salary by 30, then divide it by two</li> </ol> <p><strong>4. How much cash should you save for a down payment?</strong></p> <ol type="A"> <li>7% of the purchase price</li> <li>10% of the purchase price</li> <li>17% of the purchase price</li> <li>20% of the purchase price</li> </ol> <p><strong>5. To secure the best mortgage rate, what&rsquo;s the minimum FICO credit score you must have?</strong></p> <ol type="A"> <li>560</li> <li>660</li> <li>760</li> <li>860</li> </ol> <p><strong>6. How much money should you set aside for closing costs?</strong></p> <ol type="A"> <li>1% to 2% of the purchase price</li> <li>3% to 6% of the purchase price</li> <li>7% to 9% of the purchase price</li> <li>10% to 12% of the purchase price</li> </ol> <p><strong>7. If you don&rsquo;t have the cash for closing costs, you should put your dream of owning a home on hold.</strong></p> <ol type="A"> <li>True</li> <li>False</li> </ol> <p><strong>8. The bank has approved you for a loan that exceeds the budget you set for yourself by $50,000. You should:</strong></p> <ol type="A"> <li>Accept it. Now you can get a house with a pool.</li> <li>Politely decline and tell the loan officer where to stick it.</li> <li>Use the extra $50,000 to buy a new car.</li> <li>Reexamine your budget to see if you can afford it.</li> </ol> <p><strong>&nbsp;9. How long should you plan to live in your new home for it to make good financial sense to buy?</strong></p> <ol type="A"> <li>3 years</li> <li>5 years</li> <li>7 years</li> <li>10 years</li> </ol> <h2>ANSWERS</h2> <h3>1. B</h3> <p>Before you can start the home-buying process, you need to examine your budget so you know where you&rsquo;re at with your finances and to find out how much you can afford to spend on a home. Using your existing budget, it&rsquo;s not a bad idea to create an anticipatory budget too, which should include your monthly mortgage payment, insurance, property taxes, and other <a href="http://www.wisebread.com/what-it-really-costs-to-own-a-home">associated costs of home ownership</a>. This will help you determine if your budget can handle these expenses.</p> <h3>2. D</h3> <p>In this economy, cash for a down payment is important to a lender &mdash; it lets them know you&rsquo;re a serious buyer and that you&rsquo;re responsible &mdash; and a good credit score will help you lock in a low interest rate. Of course, to save for a down payment and establish a good credit score, you&rsquo;ll need a reliable, steady source of income in the form of a full-time job.</p> <h3>3. A</h3> <p>Financial experts suggest that the percentage of your monthly income that you should use to establish a budget for home buying should be from 25% to 33%, which makes 30% a safe compromise.</p> <h3>4. D</h3> <p>If you don&rsquo;t want to pay for private mortgage insurance, 20% of the purchase price is the sweet spot that you should aim for when saving for your down payment. Anything less will require you to purchase private mortgage insurance so the lender is protected from default on the loan. However, it doesn&rsquo;t hurt to save even more than 20% to put toward the down payment so you can ensure that you get the lowest interest rate possible.</p> <h3>5. C</h3> <p>A FICO score of 760 or higher will help you lock in the best mortgage rates. If your <a href="http://www.wisebread.com/10-surprising-ways-to-negatively-affect-your-credit-score">score is lower than 760</a>, you&rsquo;ll still be able to purchase a home, but you&rsquo;ll pay for it in the long run with a higher mortgage rate.</p> <h3>6. B</h3> <p>Between 3% and 6% of the purchase price of the home is the ideal margin of savings you should have for closing costs. These costs usually consist of loan origination fees, title insurance, attorneys&rsquo; fees, property taxes, transfer taxes, and other fees.</p> <h3>7. B</h3> <p>You don&rsquo;t necessarily have to give up your dream of owning a home if you&rsquo;re short on the closing costs. While it&rsquo;s ideal to have that cash on hand to avoid a high monthly payment because you had to finance the closing costs, you can also ask the seller to cover closing costs, especially if the place is a fixer-upper.</p> <h3>8. D</h3> <p>Remember when the government bailed out the banks a few years ago? That was largely due to large loans given to homeowners who couldn't afford them, resulting in the inability of the homeowners to pay them. To avoid the trap if the bank approves you for a loan more than you think you can afford, re-crunch your numbers to see what makes sense. Just because more money is available doesn&rsquo;t mean you have to take it &mdash; because eventually you will have to pay it back.</p> <h3>9. B</h3> <p>It takes about five years to build up equity in a home, the amount of which increases as you make payments toward the mortgage loan. If you don&rsquo;t plan to stay in your new home for at least half a decade, <a href="http://www.wisebread.com/when-you-should-and-shouldnt-rent">it may not be a good decision to buy</a>.</p> <p>Buying a home is a big decision and one that will change your life &mdash; most of the time for the better &mdash; but it&rsquo;s important to ensure that you&rsquo;re financially secure before embarking on this milestone. While home ownership comes with plenty of perks, it also comes with lots of problems &mdash; problems that you have to fix, and fixing them will usually cost money. Use this quiz as a guideline to help you make the initial decision on whether or not to start the home-buying process, but ultimately it&rsquo;s your own common sense that will dictate if you&rsquo;re ready to take the plunge yet.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/quiz-am-i-really-ready-to-buy-a-home">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/you-shouldn-t-buy-a-home-if">You Shouldn’t Buy a Home If…</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-it-really-costs-to-own-a-home">What It Really Costs to Own a Home</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/buying-your-first-home-what-to-do-and-when-to-do-it">Buying Your First Home: What to Do and When to Do It</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-evaluate-a-neighborhood-before-you-buy">How to Evaluate a Neighborhood Before You Buy</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/buy-a-home-you-can-afford-with-the-mortgage-suitcase-trick">Buy a Home You Can Afford With the Mortgage Suitcase Trick</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Budgeting Real Estate and Housing buying a house down payment first home first time home buyer Tue, 20 Nov 2012 10:24:32 +0000 Mikey Rox 955350 at http://www.wisebread.com The Housing Market Is Finally Rebounding http://www.wisebread.com/the-housing-market-is-finally-rebounding <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-housing-market-is-finally-rebounding" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="/files/fruganomics/imagecache/250w/blog-images/4629169207_05751fefb6_z.jpg" alt="sale sign" title="sale sign" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>The housing market is rebounding. Really.</p> <p>After many premature predictions and optimistic announcements, the housing market has indeed turned a corner. Home prices and sales are up. Foreclosures and mortgage delinquencies are down.</p> <p>Average home prices in the top 20 metro areas were up 1.6% in July from a year ago, according to the S&amp;P/Case Shiller Home Price Indices. All 20 cities in the index reported rising home prices for the third month in a row.</p> <p>&quot;All in all, we are more optimistic about housing. Upbeat trends continue,&quot; said David M. Blitzer at S&amp;P Dow Jones Indices.</p> <p>The median existing-home price, including all housing types, was $183,900 in September, up 11.3% from a year ago, according to the National Association of Realtors. The year-over-year monthly home prices have increased for seven months in a row. The last time that happened was from November 2005 to May 2006.</p> <p>&quot;Despite occasional month-to-month setbacks, we're experiencing a genuine recovery,&quot; said Lawrence Yun, NAR chief economist. &quot;More people are attempting to buy homes than are able to qualify for mortgages, and recent price increases are not deterring buyer interest.&quot; (See also: <a href="http://www.wisebread.com/what-it-really-costs-to-own-a-home">What It Really&nbsp;Costs to&nbsp;Own a Home</a>)</p> <h2>The Buyer's Market Is Over</h2> <p>What's more, the buyer's market may be coming to an end as sentiment begins to favor sellers. A survey by RedFin, a technology-based real estate brokerage firm, showed that homebuyers believe the market may be shifting against them. Out of 982 homebuyers polled this summer, 46% said they believe that now is a good time to buy. That was down from 56% in the first quarter and 48% in the second quarter. Thirty-two percent think now is a good time to sell, up from 13% in the first quarter and 28% in the second quarter.</p> <p>Importantly, many homebuyers, 61%, believe home prices will increase, up from 32% in the first quarter. More buyers are coming across competition or even bidding wars for a limited number of homes being sold &mdash; 71% of respondents reported encountering competition on at least one offer.</p> <p>Homes are also selling faster. The median time on the market in September dropped 30.7% from 101 days in September 2011, another indication that housing has strengthened.</p> <h2>Too Many Buyers for Homes</h2> <p>The problem for home buyers is the shortage of homes being sold. In parts of the West, the shortage is especially acute, Yun said. The number of existing homes listed for sale fell 3.3% to 2.32 million at the end of September. That's down 20% from a year ago.</p> <p>Fewer homes being sold means rising prices, a trend that will accelerate unless home builders ramp up construction fast, Yun said.</p> <p>Why the shortage? Homeowners who bought their homes before the housing bubble bust are unwilling to sell now and take a loss. Homebuilders all but stopped home construction during the recession, and a wave of foreclosures hitting the market has failed to materialize.</p> <h2>Home Buying Is for the Fast and Ready</h2> <p>Real estate agents advise home buyers &mdash; don't fret about home price trends. If you love a house and are comfortable with the mortgage payments, make an offer.</p> <p>If you want to buy a home, don't keep waiting in an attempt to &quot;<a href="http://www.wisebread.com/once-again-safe-as-houses">wait for the bottom</a>.&quot; By the time you've concluded home prices have hit bottom, they'll probably already be rising. And even if prices do fall in your area, interest rates may rise. That will make mortgages more expensive, defeating the purpose of seeking affordable housing.</p> <p>Don't be too picky. You might not find your dream house, especially with fewer homes on the market than potential home buyers. Don't worry about appliances, colors of the walls, or weeds in the yard. You can always replace a refrigerator and paint walls latter.</p> <p>Be ready and fast. Obtain <a href="http://www.wisebread.com/buying-first-home/home-loans">mortgage preapproval</a>. Submit your financial documentation to a lender to get preapproval for a maximum home loan amount. Get to know the neighborhood where you're house hunting. Learn about multiple-offer situations and plan out what you'll do.&nbsp;</p> <h2>Should You Buy a House Now?</h2> <p>So should you should you rush to by a home before home prices increase even more? It depends.</p> <p>Because real estate is local, prices in your area might not follow national trends or the trend in a nearby metro area. Examine local home values when you're home shopping, not national or regional price indexes.</p> <p>Regardless of the home price outlook, before you jump into home buying, your personal and career situation should be settled enough for you to stay put for at least a few years. Buying a home is not like speculating in gold or stocks. You can sell a commodity like a stock fairly easily, but when you buy real estate, you pay an assortment of mortgage closing costs and fees. When you sell, you pay the real estate agent a commission. For that reason, you should plan to keep the property for at least several years to make the investment worthwhile.</p> <p>Your financial house, so to speak, should be in order, your credit good enough to obtain a favorable home loan rate, and a savings large enough for a down payment &mdash; ideally at least 10% but ideally 20% to avoid private mortgage insurance, which insures the lender and brings no benefit to you.</p> <p>You should be ready to pay for maintenance and repairs or to <a href="http://www.wisebread.com/5-household-fixes-you-should-stop-paying-others-for">fix things yourself</a>. Unlike a renter who calls the landlord when a faucet leaks, you'll be responsible for mowing the lawn and fixing anything that breaks.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/michael-kling">Michael Kling</a> of <a href="http://www.wisebread.com/the-housing-market-is-finally-rebounding">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-process-for-purchasing-a-house-with-cash">The Process for Purchasing a House With Cash</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-cost-of-a-free-ride-why-not-to-use-a-buyers-agent-submitted-by-ken-rick">The cost of a free ride - why not to use a buyer&#039;s agent</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/quiz-am-i-really-ready-to-buy-a-home">Quiz: Am I Really Ready to Buy a Home?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/renting-is-cheaper">Renting is cheaper</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/us-government-offers-free-50000-to-troubled-homeowners">U.S. Government Offers &quot;Free&quot; $50,000 to Troubled Homeowners</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Financial News Real Estate and Housing buying a house foreclosures housing market Fri, 16 Nov 2012 10:36:50 +0000 Michael Kling 955599 at http://www.wisebread.com What Happens at a Foreclosure Auction? http://www.wisebread.com/what-happens-at-a-foreclosure-auction <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-happens-at-a-foreclosure-auction" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="/files/fruganomics/imagecache/250w/blog-images/8121906840_d3a626fa68_z.jpg" alt="bidders" title="bidders" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p><a href="http://www.baltimoresun.com/business/real-estate/wonk/bs-re-corelogic-completed-foreclosures-continue-to-decline-20121031,0,4507778.story">Foreclosures have declined recently</a>, but many houses are still being auctioned on courthouse steps across the country. Recently I attended one of these auctions; here is a run down of what happened and what I learned. (See also: <a href="http://www.wisebread.com/the-process-for-purchasing-a-house-with-cash">The Process for Purchasing a House With&nbsp;Cash</a>)</p> <h2>Finding a Foreclosure Auction Near You</h2> <p>Generally the list of houses up for auction are posted at an official building in each county, and many listings are also accessible online through listing services such as <a target="_blank" href="https://www.lpsasap.com/">LPS Agency Sales and Posting</a>. These auctions are also called trustee's sales because the trustee of the mortgage is making the property available.</p> <p>The auction we attended was for Solano County in California, which covers about a dozen cities. We arrived at the Vallejo City Hall a few minutes before the scheduled auction. The auctions happen on the front steps of city hall twice a day. When we arrived, the auctioneer was sitting on the ground filling out forms. A few more people filed in and waited quietly.</p> <h2>The Auction Process</h2> <p>The auctioneer stood up and asked if everyone was ready, and then she started the auction by reading out all the listings that were canceled or postponed. Many houses get taken off the auction block because the banks have worked out a short sale or decided to modify the loan, and cancelations can happen as late as the date of the auction. After she rattled off a dozen numbers and addresses, she finally got to the actual houses for sale.</p> <p>The first house was a 2,000 sq ft property in Vallejo, and the opening bid was $147,000.</p> <p><strong>Bidding Requirements</strong></p> <p>Before bidding, the qualified bidders stepped up to show the auctioneer their money. Basically, you can only bid if you can show that you have cashiers checks that can cover the amount of the bid. The bidders all have hundreds of thousands of dollars in cashiers checks in their pockets. A few people went up with their envelopes and then the bidding began.</p> <p><strong>The Bidding</strong></p> <p>The first bid was for a penny over the opening bid, then bids of $100 and $500 came in from two or three bidders. Finally the house was sold to a bidder for $158,000. After it was sold, the winner and the auctioneer stepped to the side to fill out forms, and the buyer gave the auctioneer a number of cashiers checks adding up to at least the bid amount. Any overage would be refunded later. The whole process took about 10 minutes.</p> <h2>For Buyers With Cash, Savings Are Substantial</h2> <p>During one of the breaks we talked to the winner of the first house. He told us that usually buyers can get 25% to 30% off the market price at auction. For example, the property he purchased for $158,000 was probably worth around $200,000. However, the risk is that buyers can't inspect the inside of the houses they buy, and they are responsible for any liens such as back taxes or unpaid utilities. Buyers also need cash to close the transaction right on the spot. For these reasons, buyers are mostly professional investors or work for bigger companies.</p> <p>After they purchase these houses, they often have to deal with the unpleasant business of evicting the former owners and <a href="http://www.wisebread.com/what-it-really-costs-to-own-a-home">making any necessary repairs</a>. Currently many investors are renting out houses after they buy them. They are planning to sell after the housing market recovers further. The bidder we spoke to works for a company, and he said that he buys one or two houses per day.</p> <h2>Too Many Houses, Too Few Buyers?</h2> <p>In the end only a few houses sold. Many listings went back to the bank because the starting bid was much higher than the current market price. The investors had all done their research, so they did not bid on those properties. The houses that go back to the lender eventually will end up on the open market or will be sold to other investors in batches.</p> <p>It is definitely possible to make money on these properties if you do your research and a lot of legwork in attending auctions in your area. I felt like it was actually much more transparent than <a href="http://www.wisebread.com/how-to-choose-a-real-estate-agent">buying a house from a realtor</a> because everyone knows the bids, and there isn't a lot of competition. The deal also closes right away, so it is a much more efficient process. However, it is definitely not the way to buy a house for those who need a loan or those unprepared to make substantial repairs on their new, formerly foreclosed property.</p> <p><em>Have you thought about purchasing a house at a foreclosure auction?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/xin-lu">Xin Lu</a> of <a href="http://www.wisebread.com/what-happens-at-a-foreclosure-auction">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-6"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-process-for-purchasing-a-house-with-cash">The Process for Purchasing a House With Cash</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-cost-of-a-free-ride-why-not-to-use-a-buyers-agent-submitted-by-ken-rick">The cost of a free ride - why not to use a buyer&#039;s agent</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-long-can-you-stay-in-your-home-after-you-stop-paying-the-mortgage">How Long Can You Stay in Your Home After You Stop Paying the Mortgage?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/quiz-am-i-really-ready-to-buy-a-home">Quiz: Am I Really Ready to Buy a Home?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/renting-is-cheaper">Renting is cheaper</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing auction buying a house foreclosure Wed, 14 Nov 2012 10:36:46 +0000 Xin Lu 955195 at http://www.wisebread.com Best Money Tips: Steps to Buying a House http://www.wisebread.com/best-money-tips-steps-to-buying-a-house <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/best-money-tips-steps-to-buying-a-house" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="/files/fruganomics/imagecache/250w/blog-images/2363244104_7b1deb0fb0_z-1.jpg" alt="Steps to Buying a House" title="Steps to Buying a House" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Welcome to Wise Bread's <a href="http://www.wisebread.com/topic/best-money-tips">Best Money Tips</a> Roundup! Today we found some awesome articles on steps to buying a house, reasons you need a spending plan, and Black Friday myths exposed.</p> <h2>Top 5 Articles</h2> <p><a href="http://www.thousandaire.com/9-big-steps-to-buying-a-house/">9 Big Steps to Buying a House</a> &mdash; When buying a house, don't forget to get an inspection. [Thousandaire]</p> <p><a href="http://www.freemoneyfinance.com/2012/10/6-reasons-you-need-a-spending-plan.html">6 Reasons You Need a Spending Plan</a> &mdash; It is important to have a spending plan because you need to understand where your money is going. [Free Money Finance]</p> <p><a href="http://livingonthecheap.com/2012/10/14-black-friday-myths-exposed/">14 'Black Friday' myths exposed</a> &mdash; Just because you see a leaked Black Friday ad doesn't mean it's accurate. [Living on the Cheap]</p> <p><a href="http://www.stackthechips.com/3-things-to-save-on-3-things-to-splurge-on/">3 Things To Save On / 3 Things To Splurge On</a> &mdash; It is ok to splurge on under garmets, but just make sure to save on food. [Stack The Chips]</p> <p><a href="http://www.freemoneywisdom.com/5-simple-tips-to-saving-money-on-your-energy-bills/">5 Simple Tips to Saving Money on Your Energy Bills</a> &mdash; Save money on your energy bills by air drying your clothes. [Free Money Wisdom]</p> <h2>Other Essential Reading</h2> <p><a href="http://www.savvysugar.com/Steps-Take-After-Job-Interview-2871452">5 Steps To Take After A Job Interview</a> &mdash; After you interview for a job, critique your performance. [SavvySugar]</p> <p><a href="http://www.thedigeratilife.com/blog/upside-down-car-loan/">How To Escape An Upside Down Car Loan</a> &mdash; Want to escape your upside down car loan? Consider selling your car. [The Digerati Life]</p> <p><a href="http://www.thewisdomjournal.com/Blog/9-signs-youre-financially-dysfunctional/">9 Signs You Are Financially Dysfunctional</a> &mdash; You may be financially dysfunctional if you are only enjoying relative success. [The Wisdom Journal]</p> <p><a href="http://dqydj.net/how-to-get-started-investing-when-youre-hopelessly-clueless-or-dont-care/?utm_source=feedburner&amp;utm_medium=feed&amp;utm_campaign=Feed%3A+DQYDJ+%28Don%27t+Quit+Your+Day+Job%29">How to Get Started Investing When You're Hopelessly Clueless (Or Don't Care!)</a> &mdash; Are you trying to get started investing but don't know what you are doing? Look into Target Date Funds! [Don't Quit Your Day Job]</p> <p><a href="http://parentingsquad.com/the-list-what-to-take-the-hospital-when-having-a-baby">The List: What to Take to the Hospital When Having a Baby</a> &mdash; If you are going to be headed to the hospital and having a baby soon, remember to pack your toiletries. [Parenting Squad]</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ashley-jacobs">Ashley Jacobs</a> of <a href="http://www.wisebread.com/best-money-tips-steps-to-buying-a-house">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-7"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/renting-is-cheaper">Renting is cheaper</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/are-you-ready-for-home-ownership">Are You Ready for Home Ownership?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/real-estate-appraisals-ten-things-most-people-just-dont-understand-about-them">Real Estate Appraisals - Ten things most people just don&#039;t understand about them</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-process-for-purchasing-a-house-with-cash">The Process for Purchasing a House With Cash</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-cost-of-a-free-ride-why-not-to-use-a-buyers-agent-submitted-by-ken-rick">The cost of a free ride - why not to use a buyer&#039;s agent</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing best money tips buying a house house real estate Wed, 24 Oct 2012 07:59:00 +0000 Ashley Jacobs 955321 at http://www.wisebread.com The Process for Purchasing a House With Cash http://www.wisebread.com/the-process-for-purchasing-a-house-with-cash <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-process-for-purchasing-a-house-with-cash" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="/files/fruganomics/imagecache/250w/blog-images/front_porch.jpg" alt="Woman and kids on front porch" title="Woman and kids on front porch" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Several years ago I wrote an article about <a href="http://www.wisebread.com/the-pros-and-cons-of-paying-cash-for-a-house">the pros and cons of paying cash for a house.</a> Some readers asked me how this can be done and what the procedures are. Last year my husband and I actually did purchase a property with cash, and here is our experience. (See also: <a href="http://www.wisebread.com/going-green-how-to-live-a-nearly-cash-only-life">How to Live a (Nearly) Cash-Only Life</a>)</p> <p>The property we bought was listed on the public multiple listing service. It was bank owned, so I called the listing agent and asked for an appointment. The listing agent immediately told us that the bank could only accept cash offers at this point because the property already has another cash offer on it. After seeing it and finding that it was in great condition, I made a pretty fair offer that was about 95% of the listing price. I also had to submit evidence of my funds along with my offer. The bank gladly accepted, and I sent in an earnest deposit check for $5,000. This check was then put into escrow towards the purchase of the house.</p> <p>Next, we hired an inspector to look at the property to see if there are any defects. Unfortunately, the air conditioning system was broken, but the bank refused to pay for it, and we agreed to fix it out of pocket. The bank did agree to pay for title insurance, half of the escrow fee, and clear all liens from the property. So I made sure that all the unpaid bills and taxes on the property were paid before closing.</p> <p>Meanwhile, I was gathering my funds all into one account so that I could send it into escrow before closing. We were able to choose our closing date to be the end of June, since we didn't have to deal with a loan. This was advantageous to us, since the bank had to pay all the property taxes for the first half year. I asked for the HUD closing statement about three days before closing and made sure that everything looked correct.</p> <p>On the day before closing, I made sure all the funds were in my account and then sent the money to escrow. Everything went fairly smoothly, and the whole process took about three weeks from looking at the property to getting the keys. The closing costs were less than 1% of the price of the property because we didn't have to deal with a loan.</p> <p>We were able to fix the air conditioner for a very fair price, and we rented the property out after several weeks of open houses. Now that we've owned the property for more than six months, we are actually eligible to take money out via a cash out refinance, but we don't need the money right now. The point is that if we didn't make a cash offer, then we would not have been able to procure this property at all. Basically, the process to buying a house with a cash on the open market is pretty much the same as <a href="http://www.wisebread.com/buying-first-home/home-loans">buying a house with a loan</a>, but you have more flexibility on the closing date, and that is a competitive advantage over offers with a loan contingency. You don't have to sign as many papers, but you still have to do your due diligence and make sure that you have a bit of cash buffer left over after the purchase for possible repairs and improvements. &nbsp;</p> <p><em>What do you think? Are you thinking of buying a house with cash?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/xin-lu">Xin Lu</a> of <a href="http://www.wisebread.com/the-process-for-purchasing-a-house-with-cash">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-8"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-cost-of-a-free-ride-why-not-to-use-a-buyers-agent-submitted-by-ken-rick">The cost of a free ride - why not to use a buyer&#039;s agent</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/quiz-am-i-really-ready-to-buy-a-home">Quiz: Am I Really Ready to Buy a Home?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/renting-is-cheaper">Renting is cheaper</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-housing-market-is-finally-rebounding">The Housing Market Is Finally Rebounding</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/will-house-prices-keep-dropping">Will house prices keep dropping?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing becoming a homeowner buying a house paying cash Mon, 30 Jan 2012 10:48:22 +0000 Xin Lu 879768 at http://www.wisebread.com How to Choose a Real Estate Agent http://www.wisebread.com/how-to-choose-a-real-estate-agent <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-choose-a-real-estate-agent" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="/files/fruganomics/imagecache/250w/blog-images/bigstock_Realtor_Giving_Key_To_Couple_3256228-2.jpg" alt="Realtor giving key to couple" title="Realtor giving key to couple" class="imagecache imagecache-250w" width="250" height="138" /></a> </div> </div> </div> <p>Buying or selling a home is one of the biggest financial transactions you will ever make, and it&rsquo;s important to have a real estate agent who can give you a true idea of your options, explain the details of the transaction to you, and help to navigate any potential problems. But how do you choose a real estate agent? How do you avoid the untrustworthy agents and find someone who is professional and has your best interest at heart? (See also:&nbsp;<span style="text-decoration: underline;"> </span><a href="http://www.wisebread.com/when-should-you-fire-your-real-estate-agent">When Should You&nbsp;Fire Your Real Estate Agent?</a>)</p> <h3>1. Have High Expectations</h3> <p>If your expectations for a real estate agent are simply someone to chauffeur you to houses and unlock the doors, or someone who will just list your house for you, your expectations are too low, and they will be self-fulfilling. Think of a realtor as a professional, not a salesperson, and hold them to the same expectations that you would hold any other professional, such as a CPA, an attorney, or a doctor.&nbsp; This is the person who will be advising you on how to spend a huge chunk of money. The agent should be able to educate you on your options and help you to understand the consequences of whatever choices you decide to make.</p> <h3>2. Look for Certain Qualities</h3> <p>In the current market, there are few easy deals to be had in real estate. Many transactions, especially complicated ones such as short sales, require someone with the skills and expertise to navigate all of the potential problems. Whether your real estate agent has the right skills may affect whether or not you are able to buy or sell a home at all. <a href="http://markusandheidi.com/">Markus Brown</a>, a real estate agent in Orange County, says these are the top qualities you should look for in a real estate agent:</p> <ul> <li>Organization skills and detailed knowledge of the stacks of paperwork and legal issues that are involved<br /> &nbsp;</li> <li>Negotiation skills &mdash; someone who can deal efficiently with problems as they come up, who has good people skills when dealing with opposing agents<br /> &nbsp;</li> <li>For sellers, a marketing strategy and experience marketing homes<br /> &nbsp;</li> <li>Excellent communication skills &mdash; someone who can explain things to you in terms that you understand, empowering you to make the right decisions</li> </ul> <h3>3. Interview Your&nbsp;Potential Agent</h3> <p>Brown says, &ldquo;Sellers usually interview agents, since they are paying them, but buyers often don&rsquo;t think of interviewing agents, to their detriment.&rdquo; Whether you are buying or selling, take the time to interview at least three real estate agents. You can meet real estate agents through referrals from family and friends, or you can find them at open houses. It&rsquo;s a good idea to visit an open house and talk with a real estate agent face-to-face before requesting an interview. If an agent isn&rsquo;t interested in being interviewed, find someone else.</p> <p>Be careful about working with family or friends who are real estate agents. Buying or <a href="http://www.wisebread.com/big-mistakes-you-can-make-when-selling-your-home">selling a house</a> is possibly the biggest financial transaction of your life, and you deserve to work with the best person for the job. Family obligations should have no place in this business transaction, and if a deal goes sour, it may cause awkwardness and heartache in the end.</p> <p>When interviewing a real estate agent, Brown suggests the following questions:</p> <p><strong>How long have you been in the business?</strong></p> <p>This is the agent&rsquo;s opportunity to explain how they gained the skills for the job. How an agent answers this question can provide insight into the way they think and work. Agents who use this question to brag about how amazing they are instead of how they helped buyers and sellers accomplish their goals might be the sort of people who talk more than they listen &mdash; a bad sign. Remember, just because someone has been in the business forever doesn&rsquo;t mean they&rsquo;re the right person for the job; sometimes someone with less experience can be just as knowledgeable and may have other skills that will be valuable.</p> <p><strong>Can you describe the process, from start to finish, of buying or selling a house?&nbsp; </strong></p> <p>How well does the agent <a href="http://www.wisebread.com/25-ways-to-communicate-better-today">explain things</a> to you? Do you have a clear picture of the process, and do you feel empowered rather than belittled? Never work with an agent who talks down to you.</p> <p><strong>Can you describe how you treat the offer process? How do you submit my offer to the seller? (Or, if you are the seller </strong><strong>&mdash;</strong><strong> how do you assess potential offers?</strong></p> <p>Does the agent present offers in person? Do they try to meet with the listing agent to establish a good rapport? How will the agent discuss potential offers with you, and what strategies do they have for responding to offers?</p> <h3>4. Look for Red Flags</h3> <p>At the end of the day, you have to decide whether you feel comfortable working with a particular real estate agent. If something about them feels untrustworthy, go with your gut and look for someone else (there are plenty of agents out there). Be especially wary of working with the following:</p> <ul> <li>Agents who talk more than they listen, or talk about themselves more than they listen to you.<br /> &nbsp;</li> <li>Agents who are part-time &mdash; either they can&rsquo;t cut it in the real estate world and have to hold on to a day job, or they won&rsquo;t have the detailed knowledge and expertise of someone who makes it their primary business.<br /> &nbsp;</li> <li>Agents who are desperate for your business. If they are trying too hard to gain you as a client, chances are they will not give you objective advice. An agent who wants to close the deal too much may pressure you into something you aren&rsquo;t happy with.</li> </ul> <p><em>Have you had a good experience with a real estate agent? What qualities made that agent successful?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/camilla-cheung">Camilla Cheung</a> of <a href="http://www.wisebread.com/how-to-choose-a-real-estate-agent">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-9"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-cost-of-a-free-ride-why-not-to-use-a-buyers-agent-submitted-by-ken-rick">The cost of a free ride - why not to use a buyer&#039;s agent</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-process-for-purchasing-a-house-with-cash">The Process for Purchasing a House With Cash</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/quiz-am-i-really-ready-to-buy-a-home">Quiz: Am I Really Ready to Buy a Home?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-you-cant-trust-a-real-estate-agent">Why you can&#039;t trust a real estate agent.</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/renting-is-cheaper">Renting is cheaper</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing buying a house hiring professionals real estate agents Thu, 26 Jan 2012 11:24:13 +0000 Camilla Cheung 876945 at http://www.wisebread.com 7 Surprising Facts About Roth IRAs http://www.wisebread.com/7-surprising-facts-about-roth-iras <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-surprising-facts-about-roth-iras" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="/files/fruganomics/imagecache/250w/blog-images/grandparents_roth_IRA.jpg" alt="Grandparents" title="Grandparents" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>Roth IRAs are a great way to build a nest egg for your retirement. If you&rsquo;re already contributing to your company&rsquo;s 401(k), adding a Roth IRA can give you added tax flexibility when you start withdrawing. Since you&rsquo;ve already paid the taxes on the money you contribute, you can take money out tax-free, and that will help minimize taxes from your 401(k). (See also: <a href="http://www.wisebread.com/optimize-your-ira-and-401k">Optimize Your IRA and 401(k)</a>)</p> <p>That&rsquo;s just one of the many benefits &mdash; here are seven surprising things you may not know about the Roth IRA.</p> <h3>You Can Take Your Money and Run</h3> <p>Retirement accounts have all kinds of rules and regulations, right? Well, the Roth IRA lets you take your money out whenever you want &mdash; with no penalties. Any investment gains are subject to different rules, but the money you put in is yours whenever you want it. So if you&rsquo;re worried that you might need the money, worry not &mdash; unless your investment goes down, of course.</p> <h3>A Roth IRA Can Fund Your First Home</h3> <p>If you want to take out some of those investment earnings, you can do so one time. You&rsquo;re allowed to take up to $10,000 of your earnings to put towards buying a home IF you&rsquo;re a first-time homebuyer.</p> <h3>Dividends Aren&rsquo;t Taxed</h3> <p>Any dividends you&rsquo;re paid on a stock or security you own in a Roth IRA account aren't taxed. This is a HUGE deal if you own a dividend-paying stock for many years. It can add up to thousands and thousands of dollars that you won&rsquo;t ever have to pay taxes on. Can&rsquo;t beat that.</p> <h3>It's Not for Everyone</h3> <p>Not everyone can contribute to a Roth IRA. These rules change annually, but for 2012 if you&rsquo;re single and make more than $125,000 or married (filing jointly) and make more than $183,000, then you can&rsquo;t contribute.</p> <h3>You Can Contribute After January 31</h3> <p>You have until tax day (April 15) to contribute towards to the previous year&rsquo;s limit. For example, you have until <a href="http://www.wisebread.com/15-surprising-facts-about-income-tax">April 15</a> to contribute towards your 2011 limit of $5,000 (or $6,000 if you&rsquo;re over 50).</p> <h3>Death Isn&rsquo;t the End</h3> <p>If you or your spouse dies, he/she can combine the two Roth IRAs into one without any penalty.</p> <h3>You&nbsp;Can Pass It On</h3> <p>The money in a Roth IRA can be passed on to an heir without any kind of <a href="http://www.wisebread.com/tax-penalties-for-early-retirement-withdrawals">penalty</a>. It&rsquo;s a really good way to pass money down to someone else.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/carlos-portocarrero">Carlos Portocarrero</a> of <a href="http://www.wisebread.com/7-surprising-facts-about-roth-iras">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-10"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/this-one-thing-will-get-you-to-1-million-tax-free">This One Thing Will Get You to $1 Million (Tax-Free!)</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-a-roth-ira-may-be-better-than-your-401k">4 Reasons Why a Roth IRA May be Better Than Your 401(k)</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-set-up-an-ira-to-build-wealth">How to Set Up an IRA to Build Wealth</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/opening-a-roth-ira-for-your-kid">Opening a Roth IRA for Your Kid</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/step-by-step-guide-to-rolling-over-your-old-401k">Step-By-Step Guide to Rolling Over Your Old 401(k)</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Retirement buying a house Roth IRA tax free Tue, 17 Jan 2012 11:00:29 +0000 Carlos Portocarrero 867709 at http://www.wisebread.com How to Get Into a Good School District for Less http://www.wisebread.com/how-to-get-into-a-good-school-district-for-less <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-get-into-a-good-school-district-for-less" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="/files/fruganomics/imagecache/250w/blog-images/child_in_school.jpg" alt="Child with science fair presentation" title="Child with science fair presentation" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>If you have children in public school, then you probably chose where you live based on the quality of the school district. Often the areas with the best school districts have the most expensive real estate prices. Here are some ways to get into the good school district without buying an extremely expensive house. (See also: <a href="http://www.wisebread.com/live-where-its-cheap">Live Where It's Cheap</a>)</p> <h2>Rent</h2> <p>Generally schools do not care if you are a renter or an owner. As long as you live in a school district, your children are eligible to attend. In many of the best school districts in the San Francisco Bay area, it is much cheaper to rent than own a house. It is possible to rent in a good school district for a while and then buy a house in a cheaper neighboring town. This is what my parents did, and the school district I was in allowed me to continue in the same school after we moved. My parents bought a house right on the boundary of the school district, so I was able to walk to school. Since the house wasn't located in the good school district, it was about $100,000 cheaper than the houses on the other side of the line.</p> <h2>Apply for an Out-of-District Permit</h2> <p>Most school districts in America have some slots for out-of-district students who want to enroll. However, these permits are often issued on a lottery system and enrollment in the school you desire isn't guaranteed. Usually the out-of-district students have to maintain a certain grade point average at the school accepting them. The requirements vary from district to district, so you should look up the rules in your area.</p> <h2>Pay Tuition</h2> <p>Some coveted public school districts actually allow out-of-district students to attend if they pay tuition. In most cases the tuition is less than what <a href="http://www.wisebread.com/are-private-schools-worth-the-money-they-demand">private schools</a> charge and also less than what a family would pay if they had to pay for property tax on an average-priced house in the district. If this is an option near you, then you could consider living in a less expensive town and paying for the good public school out of pocket.</p> <p>I'm not familiar with how public schools work in other countries, but here in America living in a good school district can really cost an arm and a leg. I completely understand why parents want to purchase a home in a good school district, but it is entirely possible to send your child to excellent schools while living in a cheaper town and saving hundreds of thousands in the process.</p> <p><em>What do you think? Did you purchase your home based on the school district?</em></p> <p>[Correction: Post was updated by Editor and some parts were removed.]</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/xin-lu">Xin Lu</a> of <a href="http://www.wisebread.com/how-to-get-into-a-good-school-district-for-less">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-11"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/20-tips-for-getting-your-security-deposit-back">20 Tips for Getting Your Security Deposit Back</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-forget-to-budget-for-these-unexpected-moving-expenses">Don&#039;t Forget to Budget for These Unexpected Moving Expenses</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-process-for-purchasing-a-house-with-cash">The Process for Purchasing a House With Cash</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-cost-of-a-free-ride-why-not-to-use-a-buyers-agent-submitted-by-ken-rick">The cost of a free ride - why not to use a buyer&#039;s agent</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/self-employed-heres-how-to-get-your-apartment-application-approved">Self-Employed? Here&#039;s How to Get Your Apartment Application Approved</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Family Real Estate and Housing buying a house children's education renting school Fri, 24 Jun 2011 10:24:19 +0000 Xin Lu 593109 at http://www.wisebread.com Military Members Can Still Utilize Homebuyer Tax Credits http://www.wisebread.com/military-members-can-still-utilize-homebuyer-tax-credits <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/military-members-can-still-utilize-homebuyer-tax-credits" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="/files/fruganomics/imagecache/250w/blog-images/flag%20garage%20door.jpg" alt="Military Home Buyers" title="Military Home Buyers" class="imagecache imagecache-250w" width="250" height="179" /></a> </div> </div> </div> <p>Thousands of Americans took advantage of the landmark $8,000 tax credit for first-time homebuyers that expired last fall. The first-timer credit and its companion $6,500 credit for existing homeowners helped breathe life into the slumping real estate market. But there's one deserving demographic that didn't get a fair shake at the money-saving opportunity &mdash; U.S. military members who were serving overseas during the program's duration. The good (and in many circles, surprising) news is that qualified service members can still take advantage of these tax credits, long after they were shuttered for civilians. (See also: <a href="http://www.wisebread.com/the-first-time-home-buyer-credit-how-big-of-a-deal-is-it">The First-Time Homebuyer Credit: How Big of a Deal Is It?</a>)</p> <p>The clock is ticking, though. Military members who <a href="http://www.irs.gov/newsroom/article/0,,id=215594,00.html">served at least 90 days on qualified extended duty</a> outside the United States from January 2009 through April 2010 are eligible to utilize the tax credits. Participants have until April 30 to purchase a home and until June 30 to close. Otherwise, the program requirements for military members are essentially the same:</p> <ul> <li>The home's purchase price cannot exceed $800,000</li> <li>At least one of the purchasers must be 18 or older</li> <li>Individuals can't have an annual income greater than $125,000; married couples who file taxes jointly can't have a combined annual income greater than $225,000</li> <li>First-time buyers cannot have owned a home in the last three years</li> </ul> <p>Military members interested in using the $6,500 credit for existing homeowners must have lived in their home for five of the last eight years.</p> <p>The tax credit can be claimed regardless of the type of financing you're using, including VA loans, which are geared toward active duty service members and veterans. These <a href="http://www.vamortgagecenter.com/buying_a_new_home.html">government-backed loans</a> have helped more than 18 million veterans become homeowners since 1944. VA loans come with no down payment, no private mortgage insurance, and flexible guidelines.&nbsp;Service members who have returned home from serving our country abroad can combine the benefits of a VA loan with these significant tax credits.</p> <p>These homebuyer tax credits aren't the only tax breaks available for military members and their families. Passed in 2003, the <a href="http://www.irs.gov/newsroom/article/0,,id=118104,00.html">Military Family Tax Relief Act</a> features provisions for home sales and travel expense deductions. Active duty personnel who served overseas may also be able to deduct taxes paid to foreign governments. The same is true if a spouse earned an income overseas and paid taxes. Even the cost of uniforms and military decorations may be tax deductible.</p> <p>Service members should check with a <a href="http://www.wisebread.com/5-things-tax-preparers-should-tell-you">tax preparation expert</a> to make sure they're capitalizing on the benefits earned by their service.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/chris-birk">Chris Birk</a> of <a href="http://www.wisebread.com/military-members-can-still-utilize-homebuyer-tax-credits">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-12"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-process-for-purchasing-a-house-with-cash">The Process for Purchasing a House With Cash</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-cost-of-a-free-ride-why-not-to-use-a-buyers-agent-submitted-by-ken-rick">The cost of a free ride - why not to use a buyer&#039;s agent</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/top-10-real-estate-tax-write-offs">Top 10 Real Estate Tax Write-Offs</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/quiz-am-i-really-ready-to-buy-a-home">Quiz: Am I Really Ready to Buy a Home?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/renting-is-cheaper">Renting is cheaper</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing Taxes buying a house home buyer tax credits military members Tue, 22 Mar 2011 11:00:25 +0000 Chris Birk 506072 at http://www.wisebread.com The Fallacy of Homeownership as a Sound Investment http://www.wisebread.com/the-fallacy-of-homeownership-as-a-sound-investment <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-fallacy-of-homeownership-as-a-sound-investment" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="/files/fruganomics/imagecache/250w/blog-images/1988187373_548be0682c.jpg" alt="beach house" title="beach house" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>Homeownership is ingrained in the American psyche. Beyond that, the idea of owning a home has become a moral imperative in the United States. Presidents from Herbert Hoover to George W. Bush have extolled the virtues of homeownership as a symbol of American freedoms and values. &quot;No man who owns his own house and lot can be a Communist,&quot; the preeminent 20th century builder William Levitt famously said.</p> <p>Owning a home has become inextricably linked to the American dream, as much a part of the social fabric as baseball and apple pie. But the reality is that most Americans would be better off buying shares of Apple instead of trying to use homeownership as a vehicle for wealth creation.</p> <p>The contention flies in the face of maxims and political mantras that millions of Americans have accepted as Gospel truth. But the numbers, the economists and the historical patterns lead to the same general conclusion: Homeownership is not a wise investment.</p> <h2>A Dearth of Diversity</h2> <p>There's a clich&eacute; about eggs and baskets that's rather apropos here. In most cases, investors would shudder at the thought of pumping a majority of their capital into a single stock, no matter how blue the chip. But that's exactly what most homeowners are doing. And it can have devastating long-term consequences given the unpredictable, fluctuating nature of the housing market. Just ask the thousands of near-retirees nationwide who've been forced to hold off on retirement because of the one-two punch of diminished stock portfolios and plummeting home values.</p> <p>&quot;You're supposed to diversify as much as possible &mdash; put your money into stocks, bonds, many different geographies &mdash; and then use the income to rent whatever you like, which allows for greater flexibility, as well as efficiencies,&quot; Robert Schiller, a professor of economics at Yale University, wrote in an October 2008 issue of Newsweek. &quot;The popular argument that renting is throwing money down the drain is really fallacious, since if one rents one can invest the money one would have put in the home in other investments, and so offset the rent with the dividends from the investments.&quot;</p> <p>Homeownership can become a black hole for income that could otherwise be redirected into investments with more stable, proven returns. Isn't the stock market risky? Sure, it certainly can prove tumultuous, especially looking at the last two years. But for most homeowners interested in maximizing return on investment, history is not on your side...</p> <h2>History is Not on Your Side</h2> <p>It doesn't square with the American mantra of homeownership, but there are numerous studies from economists, real estate experts, sociologists and others that continually lead to the same conclusion: Homeowners are lucky to break even when using their home as an investment. The reality is that, in most cases, historical returns are much more favorable for the stock market and other forms of business and even real-estate investment.</p> <p>For example, the average appreciation for U.S. homes was 5.6 percent from 1987 to 2006, according to the S&amp;P National Home Price Index. Adjusted for inflation, that's more in the ballpark of a 3- to 5-percent return. Factor in the 2 percent expense ratio of owning a home (the cost of ownership as a percentage of its value over the course of a year, as defined by The Motley Fool) and those margins shrink even further. At the same time, there are proven, big-time companies whose returns have far outstripped market averages for decades.</p> <p>Economists also point to the Case-Shiller index, a composite of 10 major cities. The return on homes is a mere 1.14 percent a year over inflation since 1987. Since 1994, the figure has increased slightly to an annual return of 4.7 percent. But factor in inflation during that span (about 2.5 percent) and you're still looking at thin margins &mdash; around 2.2 percent annually above inflation. As the Wall Street Journal recently noted, investors routinely perform better with government bonds.</p> <h2>Buying a House is Just Renting Anyway</h2> <p>Speaking of mantras and clich&eacute;s, there's one in particular that tends to dominate the buy v. rent discussion: Paying rent is simply throwing away money every month. But how many homeowners get back their mortgage interest payments, or their property taxes, or their monthly maintenance expenses?</p> <p>Homebuyers spend a good 20 years paying mortgage interest before their monthly payment starts scratching away at more of the principal than the remaining interest. In essence, homeowners are renting money from their commercial lender. Compounding that is, well, the compounding. Homebuyers will typically pay for the cost of their home again just in interest payments. Factor in two or three decades of property taxes, insurance, maintenance and improvements and a $300,000 home quite easily becomes a $1 million purchase.</p> <p>Here's an example with some numbers:</p> <p>You want to buy a $200,000 house. You put down $40,000 (at 20 percent you avoid mortgage insurance) and finance the remaining $140,000 at 5.25 percent on a 30-year mortgage. A decade later, you decide to sell your &quot;investment&quot; for $300,000.</p> <p>It's here that some homeowners are tempted to proclaim they made a cool $100,000 profit on their home investment. Ah, but not so fast...</p> <h2>The Fallacies of Cashing Out</h2> <p>With homeownership, appearance and reality are two very different things. Let's keep that same example. After the first 10 years of payments, you will have spent about $100,000, with more than $75,000 going solely toward mortgage interest. Include the $40,000 down payment and that's about $146,000 during the first decade.</p> <p>At the time of sale, you can subtract the remaining mortgage balance and sale proceeds. You're left with a whopping $22,684 return.</p> <p>But that doesn't include the money you've shelled out during the last 10 years in property taxes, insurance, maintenance and improvements. Taxes and insurance over the last decade could easily total another $35,000 to $40,000. Now you're losing money &mdash; big time. And we're not even worrying about inflation.</p> <p>Tax deductions could offset some of the pain during that decade, but certainly not enough to ease the pain.</p> <p>Homeowners can easily overlook the mountain of money they've spent during the course of owning a home when the time comes to sell. There's something about holding a six-figure check that somehow disables the brain's ability to do simple math.</p> <p>The costs of homeownership rarely meet up with price appreciation. Homeowners who bought in the Dallas area in 1986 didn't see home appreciation until 1998. In 2000, Los Angeles homebuyers finally saw home values return to what they been in 1990. Beyond that, money spent on upgrades and improvements don't generally translate into extra dollars in your pocket come closing day.</p> <p>Whatever &quot;profit&quot; emerges upon selling your home, chances are you've already spent most of it on taxes, mortgage interest and upkeep. Besides, that &quot;profit&quot; is usually short-lived anyway. Many people turn around days later and pour those funds into a new mortgage.</p> <h2>It's a Lifestyle, Not an Investment</h2> <p>Despite the political pronouncements and moral imperatives, homeownership is not a wise investment. But it's an important cornerstone of American society &mdash; one that people still hold tightly to despite boom and bust cycles and the overall grim economic picture. A Rasmussen Report in September 2008 showed two-thirds of Americans believe home buying is the best investment families can make.</p> <p>While that notion is a complete fallacy, its pervasiveness speaks to how deeply rooted the concept remains, despite mounting evidence to the contrary. For many Americans, homeownership is a right that brings an autonomy and self-fulfillment that renting will never inspire. If owning a home suits your lifestyle, find a trusted lender and the home of your dreams.</p> <p>But don't view your home as anything other than a place to hang your hat. Grand visions of home ownership as the path to wealth creation will likely leave you hanging your head.</p> <div class="field field-type-text field-field-guestpost-blurb"> <div class="field-label">Guest Post Blurb:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <p>This is a guest post by Brandon Laughridge. Brandon is the editor of the <a mce_href="http://www.mortgageloanplace.com/blog" href="http://www.mortgageloanplace.com/blog">Mortgage Loan Place blog</a>. &nbsp;MLP focuses on providing free <a mce_href="http://www.mortgageloanplace.com/widgets/" href="http://www.mortgageloanplace.com/widgets/">mortgage tools</a> and educating consumers about all types of <a mce_href="http://www.mortgageloanplace.com/government-mortgage.html" href="http://www.mortgageloanplace.com/government-mortgage.html">government mortgage loans</a>.</p> </div> </div> </div> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/brandon-laughridge">Brandon Laughridge</a> of <a href="http://www.wisebread.com/the-fallacy-of-homeownership-as-a-sound-investment">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-13"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-ways-to-finance-a-tiny-house">3 Ways to Finance a Tiny House</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-one-family-lives-well-and-even-owns-a-home-on-just-11-an-hour">How One Family Lives Well (And Even Owns a Home) on Just $11 an Hour</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-reasons-why-2015-is-the-year-to-buy-a-house">5 Reasons Why 2015 is the Year to Buy a House</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-process-for-purchasing-a-house-with-cash">The Process for Purchasing a House With Cash</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-cost-of-a-free-ride-why-not-to-use-a-buyers-agent-submitted-by-ken-rick">The cost of a free ride - why not to use a buyer&#039;s agent</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing buying a house homeownership wealth accumulation Mon, 23 Nov 2009 16:00:03 +0000 Brandon Laughridge 3842 at http://www.wisebread.com 6 Myths About Real Estate http://www.wisebread.com/6-myths-about-real-estate <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-myths-about-real-estate" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="/files/fruganomics/imagecache/250w/blog-images/real%20estate.jpg" alt="home" title="home" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p class="MsoPlainText">When stock markets go down, people tend to thank their lucky stars they own real estate, and others yet rush to the real estate market as a safe haven. But real estate isn’t always what it is cracked up to be either. Here are six common myths about owning real estate. </p> <p class="MsoPlainText">&nbsp;</p> <h2 class="MsoPlainText">&quot;Bricks &amp; Mortar are as Solid as it Gets&quot;</h2> <p class="MsoPlainText">While technically this is true (a hammer will prove this fact, albeit leaving a bit of a mess in your living room), real estate is not to be considered a solid investment that is impervious to market fluctuations. <strong>You can lose money investing in property</strong> – a lot of it. </p> <p class="MsoPlainText">Where real estate makes up for market losses in some people’s minds is in the accumulation of wealth through paying down a mortgage and increasing the principal share. You may sell the property at a loss, but end up with more money in your pocket than when you started (if you’re lucky, after fees and commissions). This is an example of <a href="/borrowing-to-invest-helpful-or-hurtful" target="_blank">“good debt”</a>  hard at work; something that can be achieved with modalities that include but are not limited to real estate. </p> <p>  <br /> <h2 class="MsoPlainText">&quot;Fixer-Uppers Mean Big Profits&quot;</h2> <p class="MsoPlainText">Susie bought a fixer-upper for $180,000, and enjoyed renovating it over the following eight years, at which point she sold it gleefully for $270,000. However, once she sat down and took into account the cost of buying and selling, property taxes, and her renovation costs of $35,000, her actual profits from this exercise were less than $20,000. Her effective rate of return (not accounting for inflation, which makes her overall profit even more grim) was less than 1.5% per year. So <strong>although big dollar gains may seem alluring, they aren’t always as profitable as at first blush.</strong> Let’s not forget that unless you enjoy living in squalor while the house is renovated, your quality of life and enjoying your home could be substandard. Or conversely, allowing the home to sit empty while you maintain another home has additional financial costs that affect your rate of return. </p> <p class="MsoPlainText">&nbsp;</p> <h2 class="MsoPlainText">&quot;Real Estate is the Best Tax-Preferred Investment&quot;</h2> <p class="MsoPlainText">Real estate is indeed a mechanism for harboring potentially large gains from taxation, although capital gains-based investments are also tax-preferred. In fact, <strong>if you invest the same amount of money in shares for the same duration you own your home for, you could arguably see even larger after-tax returns</strong>. Most people however, don’t have the stomach or patience to invest hundreds of thousands of dollars into the markets with substantial loans (mortgage-equivalents) to go along with it, and then sit patiently on said market investment for the next 15 years or so. </p> <p>  <br /> <h2 class="MsoPlainText">&quot;You Call All the Shots with Real Estate&quot;</h2> <p class="MsoPlainText">Although you have the ability to decide where, when, and how to buy, and then you have complete control over how the property looks and feels, you don’t call the shots with regards to the evolution of your neighborhood and how it affects your property value. <strong>You could have the spiffiest house on the block, but if the rest of the block isn’t following suit, you won’t likely recoup the money spent to spiff up the place when you sell.</strong> Even one crappy neighbor can ruin the party. </p> <p>  <br /> <h2 class="MsoPlainText">Speaking of Neighbors - and Liquidity…</h2> <p class="MsoPlainText">You may move in to discover that your dreams of popping by the neighbor’s place to borrow a cup of sugar are dashed when you realize your neighbor is a drug dealer with a grow op in the basement, and all manner of folks coming through at all times of the day and night. Or your neighbor could simply be a mean, crotchety person who evolves into the enemy of all that is good in your world. </p> <p class="MsoPlainText">This is when you begin to understand an inherent disadvantage of real estate in comparison to investing in shares: <strong>real estate is not as liquid, and you could be stuck with a nasty situation for longer than you are comfortable with</strong>. Being personally invested in this way can be downright painful. </p> <p>  <br /> <h2 class="MsoPlainText">&quot;Property is Less Volatile Than Shares&quot;</h2> <p class="MsoPlainText">If you could monitor the value of your property every day like you do with stocks, you might just discover that <strong>your rock-solid real estate investment is as wobbly day-to-day as any stock is</strong>. Thank goodness you can’t. Now I wonder what would happen if we couldn’t monitor our stock investments every day…we may all be much richer in the end, with fewer grey hairs for all our worrying about market fluctuations. </p> <p class="MsoPlainText">&nbsp;</p> <p class="MsoPlainText">&nbsp;</p> <p class="MsoPlainText">Having debunked six common myths about real estate,<strong> I must note that if properly incorporated into your overall portfolio, real estate has a very legitimate place as a tax-preferred wealth creation mechanism.</strong> I believe the world is learning some valuable lessons right now about the consequences of overextending ourselves with oversized mortgages. But this too – along with the market fluctuations we are seeing – will pass, and hopefully we will emerge all the wiser as victors…eventually. As with so many investments, give it time. </p> <p class="MsoPlainText">&nbsp;</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/nora-dunn">Nora Dunn</a> of <a href="http://www.wisebread.com/6-myths-about-real-estate">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-14"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-process-for-purchasing-a-house-with-cash">The Process for Purchasing a House With Cash</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-cost-of-a-free-ride-why-not-to-use-a-buyers-agent-submitted-by-ken-rick">The cost of a free ride - why not to use a buyer&#039;s agent</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/quiz-am-i-really-ready-to-buy-a-home">Quiz: Am I Really Ready to Buy a Home?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/renting-is-cheaper">Renting is cheaper</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-housing-market-is-finally-rebounding">The Housing Market Is Finally Rebounding</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing buying a house home ownership property investment property management real estate investment Thu, 16 Oct 2008 01:25:37 +0000 Nora Dunn 2522 at http://www.wisebread.com What your house is really worth http://www.wisebread.com/what-your-house-is-really-worth <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-your-house-is-really-worth" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="/files/fruganomics/imagecache/250w/blog-images/nice-house.jpg" alt="A nice house" title="A Nice House" class="imagecache imagecache-250w" width="250" height="196" /></a> </div> </div> </div> <p>There are several things you can do with a house that you own.  During the housing boom, most of the attention was focused on two of those things:  You could sell it, or you could borrow money against it.  Now that the bust has arrived, it&#39;s easy to see the limitations of that particular model.  Happily, there&#39;s a more stable, more useful way to value your house.</p> <p>Until the housing boom distracted people with fantasies of easy riches, most people focused on the two other things you can do with a house you own: <ul> <li>If you live in it, you don&#39;t have to pay to rent someplace else to live</li> <li>If you don&#39;t live in it, you can get paid rent to let someone else live there</li> </ul> <p>Looked at this way, what is a house worth?<br /> <h2>The financial analysis</h2> <p>Purely as an example, suppose you can rent an apartment as large as a small house for around $750 a month.  (That&#39;s what a largish apartment around here might run).</p> <p>Alternatively, suppose you owned a small house about the size of that apartment.  You&#39;d have a few expenses that the renter doesn&#39;t have:  property taxes, insurance, maintenance, water, sewer, garbage, etc.  If those add up to, let&#39;s say, $400 a month, then owning a house is worth $750 minus $400:  $350 a month.</p> <p>Note that this is true <strong>whether you&#39;ve got a mortgage on the house or not</strong>.  Just like having some credit card debt doesn&#39;t change the value of the clothes or TV or BBQ grill that you might have charged, the value of your house is unrelated to the structure of any debts you might have.</p> <p>A <a href="http://www.arachnoid.com/lutusp/finance.html">financial calculator</a> can crank out a value for a $350 stream of income.  Depending on the value you pick as the relevant discount rate, that stream of income is worth around $60,000 to $65,000.  (I used 6.5% as the discount rate.  You also have to plug in a number for how long the stream of payments goes on, but the payments in the distant future are discounted away to a vanishingly small value--a stream of $350 payments that goes on for 100 years is only worth a couple thousand dollars more than a stream that only goes on for 50 years.)</p> <p>Now, around here, a house comparable to a $750/month apartment (2 bedrooms, 1 bath, 1000 sq ft) could just about be had for $65,000--but only if it had serious problems.  It would probably have a serious maintenance backlog or be in a bad neighborhood, or else it would cost more.  (This is a big part of the reason that I rent rather than owning a house.)<br /> <h2>Non-finanacial aspects</h2> <p>You can&#39;t write in praise of renting without getting a lot of comments from people who think that renting amounts to stuffing their money down a rathole.  You write checks month after month--possibly for years--with nothing to show for it.  On the other hand, if you buy, you end up owning something.  There&#39;s some truth to that, but it&#39;s worth being clear about what, exactly you do own.  Specifically, you own the items listed at the beginning:  You can sell it, mortgage it, live in it, or rent it out.</p> <p>There are, of course, other advantages to living in a house:  You have more privacy, more control of your living environment, more options in terms of size and amenities, and so on.  But you don&#39;t own those things--those things you pay for just like rent.  That is, the money you pay this month pays for this month&#39;s privacy and control.  (Because, remember, owning a house also ties you to the neighborhood.  If a creepy guy moves into the apartment next to yours, you can always move when your lease runs out.  But if a creepy guys buys the house next to yours, you can lose a lot of privacy and control at exactly the same moment having that neighbor makes it a lot harder to sell your house.)</p> <p>Of course, being tied into your neighborhood can have an upside as well--you&#39;re in a community.  But, then, some apartment buildings have a community as well, even if most of them don&#39;t.<br /> <h2>Principal and interest</h2> <p>Note that we haven&#39;t talked about actually paying the mortgage.  As I said, that&#39;s really a separate issue.  Your house is <strong>worth</strong> the cost of the rent that you don&#39;t have to pay, adjusted for the extra expenses that fall on a homeowner.  The mortgage and interest are <strong>what you have to pay</strong> to get it.  (In the United States the interest payment is tax advantaged, which makes the effective cost a bit harder to figure out, but that&#39;s just a detail.)</p> <p>If what you have to pay is less than what the house is worth, it&#39;s a good deal financially.  If what you have to pay is more than what the house is worth, it&#39;s a bad deal financially.  It&#39;s that simple. </p> <h2>Accumulating wealth</h2> <p>People seem to be strongly motivated by the idea that the money that goes toward their mortgage is going to buy something that they own, whereas money that goes toward rent is just gone.  I think looking at homeownership that way just confuses people.</p> <p>Your house is worth what it would cost you to rent an equivalent place or what you could get for it if you rented it out (adjusted for the expenses of home ownership).  That&#39;s true whether you own it outright or have it mortgaged to the hilt.  (Of course, if you have a mortgage you owe a large debt, but that doesn&#39;t affect the value of the house.)</p> <p>Your apartment, of course, is worth zero.  But if it&#39;s cheaper to live in an apartment than it is to live in a house--and it often is--then the apartment dweller has surplus cash to invest, and therefore can accumulate wealth.</p> <p>One thing I&#39;ve left out of this calculation is &quot;appreciation&quot; in the value of the house.  If the price at which a house can be sold grows <strong>faster than other investments grow</strong>, then home ownership can win in a big way.  But, as is now clear, there&#39;s no good reason to assume that such outsized growth can be expected.<br /> <h2>No ratholes involved</h2> <p>Whether a house is a good deal financially or not is important, but it&#39;s not the only factor.  The non-financial aspects are also important--in fact, they are often the determining factors in people&#39;s decisions to buy a house.  If you want to buy a house because you find one you want to live in and can afford, then by all means do so.  But if you&#39;ve previously been misled by the fuzzy notion that money spent on a mortgage is money &quot;invested&quot; but that money spent on rent is money &quot;down a rathole,&quot; now you know how to do a valid analysis.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/philip-brewer">Philip Brewer</a> of <a href="http://www.wisebread.com/what-your-house-is-really-worth">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-15"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/renting-is-cheaper">Renting is cheaper</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-forget-to-budget-for-these-unexpected-moving-expenses">Don&#039;t Forget to Budget for These Unexpected Moving Expenses</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-process-for-purchasing-a-house-with-cash">The Process for Purchasing a House With Cash</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-cost-of-a-free-ride-why-not-to-use-a-buyers-agent-submitted-by-ken-rick">The cost of a free ride - why not to use a buyer&#039;s agent</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-ways-to-apartment-hunt-on-craigslist-without-getting-scammed">6 Ways to Apartment Hunt on Craigslist Without Getting Scammed</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing apartment apartments buy buying a house rent Tue, 16 Sep 2008 03:14:53 +0000 Philip Brewer 2430 at http://www.wisebread.com