PROS:

Security

There is no safer feeling than being near family. When unconditional love and support is literally around the corner there is a sense of security. Some children return to their roots, or parents make the move in retirement to return to that comfort of having family nearby.

Practicality

When you need a ride to the doctor, help with a move or an extra hand for home maintenance projects, family is there to help. Parents can help their children make their house a home. Conversely, having adult children nearby can be helpful if there is an illness or need for physical assistance.

CONS:

Too close for comfort

It is true that while nothing brings comfort like family, some families find that their relationships are better when they do not live so close. Not having your parents or your adult children involved in your daily life can provide space if that is what you need. With the internet and social networking, you can still develop and maintain meaningful relationships.

Geography

If you dreamed of retiring in a warmer climate, but instead move to live near your children in a snowy northern state, you may end up resenting it. What was intended to be a move for family could ultimately cause strife. While you love living near your children, you also have to consider fulfilling your retirement dreams.

At Rockford Homes, we understand the value of family. We meet clients all the time who make the decision to move closer to their children. It is not a light decision, but whatever you choose is the right one if you have considered all of your options.

Someone to watch while you are away

Getting someone you can trust to maintain your property while you are away is critical. This person serves as your eyes and ears for potential problems. Someone should be in the home to do a check every week. Be sure to get references before entrusting someone with your key. If you worked with a realtor, they may have recommendations of individuals as well as companies who will keep an eye on things for you while you are away.

Homeowners Insurance

It is important to have a policy that provides enough coverage especially if you plan to rent either residence for part of the year. You will need to add a separate policy that covers renters and negligence or damage caused by them.

Concierge Companies

This is quickly becoming a popular and convenient option for people with second homes. Concierge companies offer services like weekly home maintenance checks, cleaning services, hire landscapers and some even offer bill paying services.  Concierge companies operate on a weekly fee or monthly retainer depending on your needs.

Other logistics to consider:

• Transition as many bills to on-line pay as possible
• Keep master documents in a safe deposit box at your primary residence and keep copies at your second home. Consider providing your attorney with a copy of these documents as well.
• Keep a maintenance person on call at both locations for unexpected emergencies (flood, break-in, storm damage)
• Turn off garbage, cable and other services at the location not in use. A mobile broadband card will provide you internet access while traveling between locations.
• Turn off water heater, gas fireplace, washer and other items that could cause problems.

Maintaining two residences can be exciting and rewarding. Coming up with a plan while you are away, and a Plan B if something happens will provide peace of mind.

Mortgage Interest

One of the biggest tax breaks you can claim as a homeowner is the interest on your mortgage. You can deduct the mortgage interest paid up to $1 million in debt for your primary home. If you take out a home equity loan at any point, you can also deduct the interest on this as well, up to $100,000 that is borrowed.

Points

You usually pay ‘points’ to your mortgage lender when you purchase your home. This is a percentage of the loan amount. If you pay enough cash at your closing (your down payment) to cover the points, the interest is deductible. Deductions for points can also apply if you refinance your home.

Energy Efficient Home Improvements

This is the last year that homeowners can claim credit for making qualifying energy-efficient home improvements like heat pumps, furnaces and exterior windows and doors. Up to 10 percent of the cost of improvements can be claimed. Homeowners who installed alternative energy equipment like solar panels or solar water heaters can receive up to 30 percent off the cost of installation.

Property Taxes

This can result in a huge tax break! A large portion of your monthly loan payment goes into an escrow account and taxes are paid out yearly. These taxes will remain an annual deduction for as long as you own your home.

Home improvements

If you make home improvements like new windows, landscaping or fences, keep your receipts. These are not immediate deductions, but when you sell your home, these purchases are included in the purchase price and itemized for tax purposes. There are deductions available for home improvements made for medical reasons (ramps, doors etc.). Discuss the specific requirements for these deductions with your tax preparer.

Selling your home

When you sell your home you will be able to avoid some taxes on the profit from the sale. Up to $250,000 ($500,000 for married joint filers) in sales gain is tax-free based on ownership and residency requirements.

Because tax rules vary due to many circumstances, these are simply guidelines that can be used to discuss with your financial advisor.

There are lots of benefits to making a condo your next home of choice:

Less maintenance

This is one of the biggest advantages of owning a condo. No mowing; no shoveling sidewalks; no painting and no exterior repairs. The convenience of having someone else handle those duties is a big plus for those who live in a condo community. Plus, condos are smaller than most homes so your maintenance needs on the inside are on a smaller scale.

Home amenities without the cost of owning a home

Condo living really boils down to convenient living. Yard maintenance and mowing is covered. Clearing snow from your driveway is covered. Owning a pool without having to clean it is covered. Fixing the roof from a storm is covered. A beautifully landscaped yard is done for you. And, home insurance is likely more affordable since you only need to cover your contents in most cases.

Price

The equation is simple: the price per square footage in a condo is generally more affordable than that of a standard home. In most cases, what you will pay in a mortgage for a condo is likely less than what you will pay in rent for an apartment of similar size.

Security

Condo living provides owners an extra layer of security. Most complexes utilize a main entrance and define stringent rules regarding solicitors and people who do not live there. Additionally, condos offer the comfort of neighbors who are likely to notice if things are out of place.

Social atmosphere

Condo communities offer social advantages. Since residents are also owners, your close quarters and like-minded neighbors provide an environment of socialization that is not typical in apartment or traditional home community.

Tax advantages

Tax advantages that are available to homeowners, are also available to you as a condo owner. There are added incentives for condo ownership since your monthly payments include your mortgage interest which will result in a deduction at tax time.

The decision to buy a condominium is becoming a more popular option for many people who simply want to cut out the hassles that can come with owning a home and who are downsizing. It is convenient living at its best.

First things first. You need Homeowners Insurance. In fact, you do not want to move into your home without it. Insurance provides you coverage protection from damage or loss in the event of a disaster. It also protects you in case someone is injured on your property and sues you. This is not a place to skimp on finances. It only takes one event to wipe you out financially. To protect you and your investment make sure your coverage provides ample protection. Your insurance agent can walk you through your options based on your specific needs, location, your mortgage, the size of your home and its contents.

Whether you purchased a pre-existing home or a new home, Repairs are just a regular part of home ownership. That means you should plan on unexpected expenses from time to time. It is wise to keep money in a rainy day fund to take care of those issues when they arise. You can save a lot of money by doing basic repairs yourself. But for larger problems –like roofing, electrical or furnace –it is well-worth the money to leave those repairs to the professionals.

One way to keep your home in tip-top shape is to conduct Regular Maintenance checks. An ounce of prevention can prevent costly repairs in the future and make your home more efficient which will save you money on utilities. Make a list of annual, semi-annual and monthly checks and make a habit of performing them.

Annual Checks- inspect foundation for cracking, caulking around windows and doors, mulch and leaves away from foundation walls, peeling paint, basement leaks, tile grout in kitchens & bathrooms and clean chimney before using the fireplace.

Semi-annual Checks- clean gutters, trim shrubs to clear foundation and exterior walls, change smoke-alarm batteries, location reminder of main shut-off valves for plumbing, electrical and gas systems.

Monthly Checks – change heating/cooling filters, check for leaks in plumbing and clean the dryer vent.

There is always something that will need done to the house, if not a repair then mowing the yard. Plan and prioritize and appreciate that while the responsibility is now all yours—so is the pride that comes with owning a home.

Determine how much you can afford

This is your starting point. What you can afford depends on your income, credit rating, expenses, debt and down payment. Outline all of your financial details so you have a clear picture of what you can afford before you begin your search.

Define search parameters

Take stock of what is important to you both in terms of location and amenities in your home as this will serve as your roadmap when you begin to search. Location considerations will include things like desirability of neighborhood, schools, access to businesses and preference for the kind of neighborhood that appeals to you. As far as amenities in a home, you will want to assess your current needs and for potential expansion of your home or family.

Easiest way to start your search

The internet! Save yourself a lot of time by doing your initial search on-line. You have access to hundreds of listings that allow you to narrow your search very quickly. Using the parameters you have set for your home in terms of location of amenities, you can quickly compare what’s on the market. In fact, about 80 percent of home searches begin on the internet.

Consider a Buyer’s agent

Securing a Buyer’s agent is not required, but many first-time homebuyers find having an agent is helpful. A good agent will listen to your wants and needs and arrange to show you homes that fit within your parameters. Your agent should also point out any concerns they have in the home you are looking at. A Buyer’s agent in on your team and should help you feel confident about the home you ultimately buy.

To make buying your first home a good experience, preparation is key. You will have realistic expectations and feel more confident as you continue through the process. In Part 2 of our series for First Time Homeownership we will look at what you need to know AFTER you move-in.

Picking the Floor Plan

Once you have selected your builder, your focus becomes the floor plan. This is the foundational structure of your home so every decision should be based on your life now and your needs down the road. Decisions about number of bedrooms, room sizes, basement structure, fireplaces and number of floor levels are things that are difficult to change later. Considerations like how long you plan to live there, growth of your family, living arrangements and adding-on to your home are important now for peace of mind later.

The Underwriter

You are almost there, and yet, a lot of anxiety rides on the underwriting of the loan. If there have been changes in your credit during this time, your loan could be denied or your appraisal could come in low. You will do yourself a favor by ensuring that your lender has enlisted a trusted appraiser who do a quality job. You also want to make sure you allow enough time for the lender to get your loan documents processed through the underwriter and to the title company.

The Protection

Once you move-in to your new home you will likely be hit with a flood of worry about how to keep your investment ‘perfect.’ The simple answer is that you won’t. Over time, repairs will be required and you will always have unexpected circumstances. The best thing you can do is prepare by making sure you understand any warranties that are on your home and the items in it. You also want to ensure that your homeowners insurance provides you with adequate coverage. You may want to review your policy after several months and make any necessary adjustments.

The Proud Homeowner

You have worked hard for your investment –Enjoy It!! If you recognize from the onset that there will inherently be some stress along the way that will help keep emotions in check. Preparation is another way to keep stress in check. And finally, keeping your expectations realistic throughout the process will help you appreciate what you had to go through to earn wings as a homeowner.

The Decision

Once you shift from daydreaming about buying your dream home to actually doing it, reality sets in quickly. Stress sets in as you recognize how little you know about all of the decisions that must be made. Keep in mind that you are not expected to have all of the answers and you are not alone. Homebuying is a process. Your homebuilder or Realtor can help provide resources to aid you in making the best decisions for your family.

The Loan

There is nothing comfortable about a lender scrutinizing your income and spending patterns. Add to that the worry of knowing that your credit history will impact the interest rate on your loan and your stress levels will likely be through the roof. While there is very little you can do about past finances or your credit profile while getting approved, you can show your lender stability by keeping all finances in line and stationary until you close on your home.

The Search

Whether you are buying a pre-existing home or building one, the options available to you are endless. It is easy to end up over budget or considering a home that does not resemble what you have in mind. Before your search, make a list of features important to you in your new home. List your ideal locations and list the areas where you are willing to compromise. Take this list with you during your searches to keep you focused.

The Builder

Your builder is your partner, so you want to establish a relationship you can trust. Reputation is important. Finding a builder known for quality in the industry is your best starting point. You want a builder who will work with you to customize your home to your needs. And, you want a builder who will be there long after the sale. A reliable service department offers you confidence that they will be there to help you protect your investment.

These are just some of the main stressors as you prepare to buy your dream home. You will not eliminate unexpected events, but there are things you can do to minimize the stress of managing them. Next week, in Part 2 of Coping with Homebuying Stress, we look at what happens AFTER securing your dream home.

1.    A homebuyer who plans to stay there awhile

If you are planning to stay in the area, buying might be a good move. However, if you anticipate relocation, it may not be the time to buy unless you plan to rent or sell your home once you move away.

2.    A homebuyer who has savings

It is not wise to invest every dollar you own into your home purchase. In fact, having at least two to three months of income in savings is attractive to lenders. It is also wise to keep an emergency fund available for unexpected expenses.

3.    A homebuyer who is realistic to the market

If you are serious about your purchase, research the market to know what homes are selling for in your desired neighborhoods. This helps you enter your search with realistic expectations. Having knowledge of home value fluctuations your search areas helps keep those expectations in check.

4.    A homebuyer with longevity on the job

Lenders will scrutinize your stability. They like to see a homebuyer with at least two years of employment at the same company. In this difficult job market, it might not be possible to show that. Having at least two years in the same industry also shows stability.

5.    A homebuyer who is able to maintain a home

Buying a home is a commitment beyond the money you spend on the purchase price. There is regular upkeep. This should be a strong consideration when determining if you are ready to own a home. There is constant maintenance with lawns and minor repairs to keep your home in good condition. These often take money, time or both.

There is certainly no magic formula that can assure you of the right time to buy for your life circumstances. It is important to consider all of the financial and emotional factors in your life to make the decision that is best for you.

Fixed rate

A fixed-rate mortgage is exactly that –fixed for the length of the loan. The advantage of a fixed-rate mortgage is that your monthly payment will remain the same for the life of that loan. Since interest rates make up part of your monthly payment, this is an attractive option for homebuyers looking for consistency. The down side of the fixed-rate is the potential for a higher initial rate compared to that of an Adjustable-rate Mortgage (ARM). But, that may not be a deterrent if long-term predictability is important to you.

Adjustable-rate mortgage (ARM)

Adjustable rate mortgages often come with initial savings, but the interest rate adjusts over time and so does the size of your monthly payment. They usually adjust upward. It is important to keep in mind that interest rates are at record-lows so they are almost guaranteed to increase significantly over the life of your loan as the housing market stabilizes. Your biggest savings with the ARM will come within the first few years.

Government loan

A Government loan is insured by government backing through the Department of Housing and Urban Development (HUD). These loans which include the Veteran Affairs (VA) loans and FHA loans have strict qualifications.

Veteran Affairs loans – This loan is specifically for members of the military and their families. The program is managed by the Department of Veteran Affairs and can be used to finance 100% of your home. This loan is helpful in eliminating the need for a down payment.

FHA loan – This loan is the most widely-used government loan program. Loans are provided by lenders in the private sector who are FHA approved lenders. The lender is insured by the FHA in the event of a default. You should know that while this option is popular, especially for those who have less than perfect credit, you are required to pay an upfront and annual premium. This protects the FHA from losses. 

Conventional loan

Unlike government loans, the conventional mortgage loan is NOT insured by the government. Plain and simple, this is a loan offered in the private sector.

The loan you choose should support your long-term goals for your home and your life. Choosing the right mortgage option for you will also depend largely on the amount of a down payment you can make, your credit score and the length of time you plan to live in the home. These are all considerations you should discuss with your lender to ensure you get the best loan for you.