Sunday, June 17, 2012

Homebuying Tips From Dad

It was a different world when Dad bought his first home.
But oddly enough, a lot of his homebuying advice (unlike some of his tie collection) is back in fashion.
Putting up a sizable down payment, holding back some cash reserves in the bank, and shopping smart so you can get the best deal on a home loan? You'll make the old man proud.
Here are five homebuying tips from Dad that will serve you (and him) just as well in today's market.

Never buy the most expensive home on the block    

When Dad told you to never buy the most expensive house on the block, he was talking about appreciation.
Over time, home values in a neighborhood tend to even out. So if you have the most expensive home, its value won't increase as much as will a low- to mid-priced home in the same neighborhood.
Conversely, according to this theory, if you want to get the most bang for your housing buck, buy a less expensive model on the best block you can afford.
The principle is, if you are buying the least expensive house on the street in a good location, the value has nowhere to go but up.
The location is the one thing you can't change, so when you make improvements.
But the smallest-home scenario can be tricky. You don't want a home that is markedly smaller unless you're looking to do some serious upgrades or additions to make it equal to the neighbors.
Otherwise, the lack of comparable properties in the neighborhood could hurt you when it comes time to sell.

Don't buy more than you can afford

A few years ago, lending standards were lax. The sky was almost the limit on how much home a buyer could purchase. But, as Dad may have mentioned a time or two, that's just bad math.
Keeping the house price to two or three times your income"is still a good rule of thumb for anybody -- especially for the first-time homebuyer.

While the seesaw on the advisable price-to-salary ratio has swung widely in recent years, it can pay to set the needle where it's truly comfortable for you. And knowing you can meet the mortgage will mean a lot less anxiety and a better night's sleep. Call it a gift from Dad.

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