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How to Buy Your Very First Home

Purchasing a home might be the biggest single purchase you’ll ever make in your life, so it’s important to know your numbers before you sign any contract.If you’re prepared to take the leap and get your first home, below are seven tips you should consider:

Your Budget

This could sound elementary, but underestimating the actual costs of ownership is a typical mistake. Not only do you have a mortgage, you’ll also have to pay taxes, insurance, and other expenses that accompany having a home.Nowadays, a down payment will often be around 20% of the purchase price.
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Your Credit Score
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Your credit score plays a critical role in securing low-interest financing.Look at your credit report and work out discrepancies before you meet with a lender.

Keeping it Small

Amassing new debt before home financing can have a bearing on your debt-to-income ratio and the amount of money you can borrow from a lender.Therefore, postpone buying a car or any other big-ticket item on credit if you have plans of buying a home very soon.

Doing Your Homework

Save time and cash by shopping around–there are tons of websites that can help you with this– to know which lenders have the best interest rates in your area.Comparison-shopping will help you save cash over the long term, and when you’re dealing with a 30-year mortgage, that long term can pretty long.

Emergency Funds

Many a dream home has grown to be a money pit, costing a lot more money than the owner had budgeted.What if your plumbing breaks down or your street floods?Before the purchase, hire a trustworthy home inspector, and get ready for the unexpected with cash allotted for the unforeseen.

Energy Tax Credits

To get energy tax credits, go for qualifying energy-efficient equipment in your home.More than a third of solar and geothermal installation costs are claimable on your taxes, meaning you get to pocket some savings.

Renovations

Though you typically can’t remove home renovations on your yearly tax return, the good news is that these costs can help you should you decide to sell your home.Simply include them in your home’s adjusted cost basis; bigger basis means smaller capital gain.To qualify as a deduction, the renovation should add materially to your home’s value, extend your home’s useful life considerably, or give your home new uses.In capital gains calculation, you will also be able to exclude up to $250,000 of the gain from the sale, or $500,000 for those who are filing jointly.

A home can help you prepare for a brighter future, or it can break your proverbial bank.Know your numbers first, and then buy into the dream.

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