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Empowering Homeowners Across America
Reasons A Home Should Be Your First Investment
By Jay Johnson, Realtor, Broker, Certified MRP.
Young adults are bombarded with advice on investing. Some come directly through business associations, while other advice is dispensed through broadcast, print, and online advertising. Should they invest in the stock market or gold and silver bars? Making the best decision isn’t easy when you are just getting started. There is, however, one investment that should be made first, and that is the purchase of a new home.
A Smart Investment
Building a retirement nest egg should begin with the purchase of a home. You can gain and lose in the stock market, but your home is a physical asset that grows in equity every year. It’s important not to stretch your budget to its limit. Choose your first home, knowing it is one step on the way to your dream house. Add updates every year so you can make a reasonable profit when you sell.
Where Your Money Goes
When you rent an apartment, condo, or house, the full monthly payment goes to the landlord. Each month the process is repeated, and the landlord’s bank account grows. When you own a home, you are saving money. Your mortgage payments goes on the loan amount, and each month your equity grows. The equity is the portion of your home’s value that you own.
First Home Price Range
Select a price range that you can easily afford, and remember to include the cost of taxes and insurance. You need to have a monthly payment your budget can handle. Some banks and mortgage companies recommend the purchase price of a home should be less than two and one-half times your annual income. You may have to purchase an older home that needs a few updates in order to stay within your budget, but all improvements increase the value of your property.
Clean Up Your Credit History
Be sure your credit report is what you think it is. Request copies from all three major credit reporting agencies. Make sure all your personal information is correct and up-to-date. Check payment records and balances for accuracy. You want your credit history to be in good shape to impress lenders and home sellers.
Once you are ready to go house-hunting, the first step is to get a pre-approval from the lending institution you are using. A pre-approval lets the seller know you are a serious buyer and have been approved for a certain amount of money. It also lets your real estate broker know you are ready to buy and have financing available.
If you’re ready to start investing and planning for your future, put a home purchase at the top of your list. Young singles and married couples will equally benefit from investing in a residence. Home ownership provides security and peace of mind.