Love Recipes, Decluttering and Mom Talk? Join my Facebook group Group Here
If you have kids now, or plan to have them in the near future, buying a house where your kids will live can seem like walking through a foreign country where you don't speak the language. Here are a few things you should know about buying your first home.
You should put down 20% as a down payment. If you do not have 20% to put down, you will have to pay the bank something called PMI. Basically you pay them extra money every month as a penalty for not putting 20% down. If you have to put down less, once you are sure that you have 20%, you can request the bank remove the PMI. Sounds great, right ? Did you know that if you buy a house for 300,000 and put 10% down (at an interest rate of 3%), after one year, you will have paid $476.23 of your mortgage and $8,022 in interest? It would take 5 years of paying your regular mortgage rate before you have the required 20 percent. You could get lucky during those 5 years and your home value could go up, or you could be unlucky and the value of your home could go down. It happens, it has happened before and it will happen again.
If you want to be a stay at home mom, you will also need to watch budget. Most sites tell you that your mortgage needs to stay below 20% of your income (some say 25). The key to this is your income. If you have a high income, you can spend a larger percent of your income on your mortgage, but if you have a low income, you need to spend a lower percent on your home. A family with a take home pay of 100,000 that spends 25,000 a year on their home has 75,000 income left for other things, while a family with a take home pay of 40,000 a year would have 30,000 left to spend on other things. Your ability to be a stay at home mom depends on your debts and your ability to pay them. Keep this in mind when choosing a home.
You read an article that says that Realtor get a commission of 5 to 6% when they sell a house, and you want to save that money for yourself! You decide to buy a home that is for sale by owner. I would not recommend it. While many people have purchased homes for sale by owner, there is a reason the seller does not want to use a Realtor. A Realtor is a trained professional that knows all the laws involved in buying a home and can help you out if you get into a sticky situation. I would highly recommend using a Realtor for your first home purchase. When we bought our first home, the original owner built a building over the property line. We would have thought it was ok, and moved on with the sale, but our Realtor explained that we could not get title insurance with a building over the line and a neighbor could sue us at any time. Not the way to start off life in your new home. Think of a Realtor like a nurse in the hospital. It may appear that she is coming in to talk to you and bring you drinks, but she is assessing you each time she enters the room. She has a purpose and you may not feel that you need her, but if something is going to go wrong, she will be the first person to spot it and she will move quickly to take care of a problem before it escalates. Realtors are well worth the money they make. Don't risk losing your home because you wanted to save a little money.
So you have an emergency fund of four months expenses, and you have 20 percent to put down on your house, plus you have saved an extra $7,000 for the fees involved in buying a house. You have made sure that the house fits in your budget. You are now ready to buy your first house! Happy Hunting!