Buying a New Home

Buying Your First Home

Buying your first home can be exciting, but can also be overwhelming. Before you shop for a home and start up a homeowner's insurance policy, you need to do research and understand the many aspects of your decision. Basic steps to buying your first residence include:

• Examining your budget and deciding on your finance limit.
• Understanding your rights as a borrower.
• Researching and deciding on the best home loan.
• Look into First Time Home Buyer Programs.

For an in-depth look at buying a first home, see LoveToKnow's First Time Home Buyers. Or check out the facts on the various types of mortgages that are available.

Subsequent Homes

Since interest rate vary and times change, you still need to be prepared to do a bit of research when it's not your first time buying a home. Make sure to check carefully into changing interest rates and whether your new payment will be feasible.

Real Estate Investing

Don't simply decide that you're ready to become a real estate mogul because an infomercial has convinced you of your destiny. Buying a new home as an investment is much more complicated than simply making the purchase and watching the piles of money come your way. You need to make sure you know what you are getting yourself into before proceeding. There is more than one way to invest in real estate:

• Purchasing a home and renting it: The home is purchased by the investor who then rents it out to someone else.
• Purchasing a home and fixing it up: A dilapidated home is purchased, fixed up, then sold for profit.
• Flipping a property: A dilapidated home is purchased and immediately sold to someone else who then fixes it up and sells it for profit.

When real estate experts sell systems promising to teach people how to make millions of dollars in real estate they are most often referring to flipping properties, not to renting out homes which you hold the title to.

Investment Loans Cost More

Many lenders do not necessarily prefer to lend money for investment mortgages. Investment mortgages are more likely to be defaulted on than mortgages for primary residences. When people run into financial trouble they are more likely to first pay the monthly mortgage for the home they live in and then secondly pay the mortgage on any investment properties. This makes investment homes more prone to eventual foreclosure, statistically.

For this reason, you will probably find the application process for an investment home more complex than the process you encountered with your primary residence. Investment loans usually costs more as well. Increased costs include:

• Higher Interest Rates.
• More Rigid Terms.
• Higher Fees and Closing Costs.

Of course, purchasing an investment property is best accomplished by using cash instead of financing the home, but this isn't a feasible option for many real estate investors.

Buying a New Home: Research

When purchasing a home for investment purposes, you should do the same amount of research that you would have done if you were buying it to live in. Unless you are experienced in real estate matters and already have buyers or renters lined up for a property, you must do some market analysis to make sure the property has the potential to be a money maker.

You don't want to buy a home just because you have a hunch that it will make you money; you should know the sales and rental history of the neighborhood. You should also be aware of the real estate intricacies of the area. Are the homes used as vacation rentals for a few months out of the year and then sit vacant for the remaining months? Is the real estate market in the area heading towards a boom or a bust? Do your homework before investing your money in real estate.

Personal Financial Considerations

There is indeed money to be made in the real estate market, but it is not a guaranteed money machine by any means. When buying a home for investment purposes, you need to take into consideration the fact that not all rentals have constant occupants, but the mortgage still needs to be paid. Not all fixed-up homes are sold quickly, but even if a home sits for months without a potential buyer the loan is still due. In order to be effective with real estate investing, you must make sure you are financially able to handle lengths of time without the additional income.