How Much You Should Spend On House
If you have a very secured job then you can go up to 40% of your gross income that means $50,000 divided by 40% equals $20,000 a year that you can spend on all your lease and interest payments. But this is just borderline, after that,
Note:
The opinions expressed in this post are those of the author,
and do not reflect in any way those of the site owners.
As regards the articles on MORTGAGE, be careful when taking decision
unless you want to become a SLAVE to your debt.
I have seen people buying big houses. They put 20% down payment, their life savings, or they borrowed money to put down payment and they were spending 70% of their meager earnings in paying the mortgage. Either these people wanted to show off that they are rich or some of them bought big homes thinking that they can flip them and make money as houses were going up in value. A lot of these people who buy homes which they cannot afford end up either losing them or losing their sleeps and have to work two times more.
Now, once it is determined how much you can pay for the mortgage, you have to start searching for where you can find the bank who will lend you the money at the best interest rates. Contact your bank with whom you have banking relations. Read your local newspaper and find out who are the wholesale mortgage lenders in your area.
NEW HOME vs. OLD HOME
It is really a matter of preference to some people. Some will say old is good and a much better investment, and some will say new is good too. In this chapter, we will discuss advantages and disadvantages of both and compare them.
1. Lot size: most of the new homes are developed on very small lots because land has become so expensive that developers like to develop up to 8 lots per acre. A lot of new homes are also developed like townhouses or duplexes where your walls are touching your neighbor’s. The disadvantage of living in smaller lots is that there is no privacy left and there is no place in the back or front yard, even the side of the road where kids can play. You cannot have big parties because of noise and parking problems. If you like gardening there is hardly any room to grow your vegetables or flowers. In a 10-acre development, 40 to 120 homes are built. Some of the old neighborhoods have bigger lots. A lot of these neighborhoods particularly in the suburbs, originally, they were like farm lands and they cut 1 acre to 5-acre lots. Now, over a period of time, they have become estate houses, but originally, when they were first bought, they were sold for nothing. These kinds of houses are becoming a thing of the past. Rich people are buying these houses, demolishing them, and putting up estate homes. Now, let us talk about old houses in rundown neighborhoods. If you have a big family, you can find a big home in an old neighborhood cheaper than in a new neighborhood where you won’t be able to afford the house.
Can you afford to buy a newer house? If you cannot afford it and you need more space then you will have to settle for older neighborhoods.
New homes are easy to sell. Most of the people who are buying homes have the money to buy newer homes. They can put good down payments or have a good income cash flow to support new homes. They can hold these homes for 5, maybe 10 years and are happy with moderate profits. Sometimes new developments really shoot up in value, but most of the time, new developments really take their time to appreciate in value. But then again, they are easy to sell if you don’t mind whether you made money or not. People who don’t know anything about construction and do not have time to take care of minor home repairs generally buy new houses.
Financing: A lot of times, when developers build new homes, they already have financing lined up for you. Some of these big developers have their own financing companies so they can sell houses with hardly any down payments and give you teaser rates which can be as low as 2% to 4% in the first few years and they will adjust to the market rates after the initial period. You cannot get these kinds of rates when they are old houses.
New houses are nice, but generally, you cannot get steals in the new colonies. Sometimes builders have a lot of inventory of these homes and they want to sell them— some of the inventory cost a lot lower than what they originally sold for, because of the recession in the real estate market, otherwise, it is hard to find good deals or steals in the new houses department. A lot of people like to buy new houses because they look clean and modern. People like to impress their friends, they do not car if it takes them longer to build equity on the new homes. New development is also not established neighborhoods and it can take them years before they get established and all the houses get built.
Sometimes new neighborhoods don’t have schools close by, but new schools will be built in the coming years, so if you have children, don’t move into those neighborhoods. Children want to play with other kids, so it is important for you to find neighborhoods which are close to good school districts— people buy houses in those neighborhoods. Now, if you are in your middle age or old have a good amount of savings, then you should buy a house in a neighborhood which has a close-by golf course, Movie Theater, social club, hospital, and other amenities. You can look into these neighborhood houses which need a little bit of LTC (loving tender care) like paint, landscaping, laminate flooring, kitchen cabinets, or oriental rugs. Now, if you find a good home in those neighborhoods at a very reasonable price but because the home needs TLC and you don’t want to do that yourself then ask some contractors to give you a bid for renovation on those things which are in bad shape and the amount of time it will take to renovate.
Buying an old home that needs repair (handyman special) you only buy those homes if you can really steal them and you have some experience in renovation or construction. Another advantage of buying one of these handyman specials in good neighborhoods is that you can buy them cheap and you can do the renovations yourself when you have time and new savings. So eventually you will have a nice home in a good neighborhood with a lot of value. Again, you need to know what you are doing and only buy in the neighborhoods where there are very few of those kinds of houses. If it is in a neighborhood where a lot of houses need fixing, don’t even bother with those.
By Ashok of http://becomerichinfiveyears.blogspot.com
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