Newlywed’s Guide To Buying a Home

Buying your first home

An exciting step for newlyweds is purchasing their first home as a married couple.  Planning a wedding is most often a stressful event in a new couple’s life.  Purchasing a home can be stressful as well, but with advanced planning, the stress can be lessened, leaving memories of a successful purchase.

Below are some tips to make buying your first home a smooth and positive experience.

Make Financial Goals

The first thing you want to talk about is your financial goals as a couple. Are you both spenders or savers? Do you want to have a joint retirement savings or keep them separate? Identifying these factors is a crucial first step before you walk down the aisle or across the threshold of your first home together.

Set Expectations

Just as there are numerous towns and subdivisions that you can choose to call home, there are equally number of styles of homes, amenities, and ‘must haves’ that need to be determined before you begin the home search.  Make a list of ‘Must Have’, ‘Negotiable Items’, and ‘Can’t Have’ about your future home and discuss them with each other.

Make a Plan

A spending plan or a budget is a vital step in planning for a new home purchase. Think of it as a financial road map that will get you through starting your lives together.  This spending plan will be a valuable tool while finding a home. You will want to take into account all the money coming in and all the money you have set aside. Compare those numbers with financial goals you previously discussed– how much do you want to have left over when it is all said and done? Those numbers will help you establish a spending cap for your new home.

There are several on-line budgeting tools available.  Dave Ramsey has an easy on-line budgeting tool available for free at DaveRamsey.com.  Be complete and accurate with your numbers.  Try living on the budget for a few months before signing on a new home.  This will allow you to work out the bugs and ensure that you are in the right price range when purchasing a home.

Items to Consider to Qualify for a Home

Credit Scores

While new couples have formed a joint union, their credit scores haven’t. The scores are determined individually, but both scores will count toward qualifying for a loan, if both incomes are needed because of the amount of the mortgage. The mortgage interest rate depends on the credit score as well as the type of mortgage and the length of time. The first step is to obtain your credit report/scores, and review the reports for any errors. If the scores are less than you hoped, raising scores a hundred or so points in six months is achievable.

Pay Down Debt

Not only will your credit score be considered, but also your total debt level and debt-to-income ratio. Tightening your belts and get rid of as much debt as you can will help you qualify for your new home. It is advised to NOT close the accounts after paying off debt. A factor in your credit score is your used debt compared to available debt. If you close an account, you’ll decrease your available debt total.

Save for Down Payment

Expect to pay a 20 percent down payment. If your credit score is at the border of going from mediocre to good, a larger down payment might persuade the lender to not only approve the loan but give you a lower interest rate.  There are Government Grants available for first time home buyers, read more about it at BankRate.com.

Increase Gross Income

How much house you can afford depends on how much you can pay every month. Most lenders prefer that you keep that figure at no more than 28 percent of your gross income. For example, if your household income is $4,000 a month before taxes, then your ideal maximum house payment would be $1,120 (which is roughly a $220,000 home at 5% interest rate). If you make $6,000, you can afford up to a $1,680 monthly payment. Goals could include getting a new job at a higher salary level from six to 12 months before you apply for the mortgage, getting a promotion at work, working overtime, going from part-time to full-time work, or possibly getting a second job.

Making the decision to purchase a home as newlyweds is an exciting event, for more information on purchasing a new home, contact the CLA Realty Team.

A 1031 Exchange is a Powerful Tax Strategy

A 1031 Exchange is a powerful tax-deferment strategy used by some of the most financially successful investors to defer taxes1031 Tax Exchange when selling investment/commercial property.  This effective strategy is also known as a “Starker Exchange”, named for the first tax case that allowed the exchange, or a “Like Kind Exchange”, referring to the type of change that occurs.  This tax-efficient way of preserving capital that is invested in real estate is appropriately named a 1031 Exchange, after Section 1031 of the IRS code.

Section 1031 of the Internal Revenue Code provides an exception that allows the deferment of payments of capital gains taxes when a business or investment property is sold, if the reinvestment of the proceeds is reinvested in a similar property through a like-kind exchange.  To put it simply, a 1031 exchange allows an investor to “defer” paying capital gains taxes on an investment property when it is sold, as long another “like-kind property” is purchased with the profit gained by the sale of the first property.  An investor will eventually cash out and pay taxes, but in the meantime, Section 1031 allows an investor to trade properties without incurring a sudden tax obligation. Continue reading

Crowdfunding Your Real Estate Purchase

Real Estate has historically generated 9.6%+ returns with less volatility than the stock market. Unfortunately, since real estate Crowdfunding Your Real estate purchaseis typically expensive, ordinary investors have been left out of enjoying these profits.

Have you ever considered crowdfunding your real estate purchase?  Crowdfunding may be a term you don’t recognize.  Crowdfunding is the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the internet.

Crowdfunding has become something of a buzzword among investors, and it’s been particularly well received in the real estate sector. Though it is still relatively new, real estate crowdfunding is rapidly reshaping the way individuals find and invest in properties.

We live in a world of new technologies, a place where things that once seemed impossible are now considered the norm. Uber, Amazon, Airbnb and many others have completely changed the way people buy and sell goods and services. A Gofundme campaign, which is a form of crowdfunding, can be set up in minutes to get you to go visit faraway places, buy a new toy, help out a friend in need, or support a great cause.

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