10 Tips for Buying Your First Home in Southern Maryland

Are short sales and foreclosures tempting you into home ownership? Did you find the perfect starter home that happens to be listed at an amazingly low price due to foreclosure? It’s certainly a buyers market here in Southern Maryland! If you think that home ownership can be had for less money now than before, you’re right. However, don’t bite off more than you can chew. Sure, you can buy a used Mercedes Benz and stay in your budget, but you better be prepared when maintenance bills come due. Forbes.com has a great list of 10 tips for first time home buyers (see 10 Tips For First-Time Home Buyers). I agree with all of them, so I wanted to pass the information along.

# 1 To Own or Not To Own?

Sure, you can pay the same amount for a mortgage on a foreclosure as you’re paying now for rent, but you’ll be paying more than just the mortgage with home ownership. Don’t forget closing costs just to buy the home, insurance, property taxes, and just general maintenance. When you’re already in a tight financial spot, having to deal with a busted pipe in the basement push you too close to the edge.

# 2 Are You Sure You Can Afford To Own?

I know, you think I’m repeating myself. But this is the most obvious and, sadly, overlooked or under-analyzed question. The first wave of the foreclosure crisis was due to people not being honest with themselves and answering this incorrectly. Not only will you have the costs we already discussed, but you’ll still have your regular monthly expenses like water, heat, electric, etc.

# 3 Get Your Hands On All the Tax Credits You Can!

If you’ve decided to move forward with buying your first home, there are MANY incentives to help you out! The most obvious one is the $8,000 federal tax credit. As of right now, you have to have a ratified contract on a property by May 1st, so don’t waste time! If you’re looking at buying a foreclosure, you’re looking at an average of 3 months from contract to closing. There are also local tax credits for Prince George’s and Charles County.

# 4 Get a Loan From Uncle Sam

Try to get a mortgage guaranteed by the FHA (Federal Housing Administration). You’ll have to put less money down on the house – only 3.5%! Only exception is if you have a credit score of 580 or lower, they’re going to make you put 10% down. Another thing – the FHA is not real keen on guaranteeing a loan on ‘fixer upper’ foreclosures, so don’t expect to buy a $100,000 mold-infested foreclosure and have Uncle Sam be ok with loaning you money.

# 5 Getting Money From Mom and Dad? Watch Out For Taxes On Gifts

Many first-time home buyers get large money gifts from family to help with their down payment or closing costs. BE CAREFUL how you handle this. An outright cash gift can result in BIG taxes for you – not to mention the fact that the bank guaranteeing your loan is going to wonder why all of a sudden there’s a $5,000 deposit into your checking account for no apparent reason. Before taking a cash gift from family or friends, consult with your Realtor or lender to make sure you’re helping – and not hindering – your purchase.

# 6 Not Like I Need To Tell You, But…Consider Foreclosures

The most obvious reason for first-time home buyers coming out of the woodwork during a recession has been because of foreclosures and short sales. You can get some really great deals on wonderful homes if you can be fast enough. First thing is to get a pre-approval letter from a lender. This is also where working with a Realtor who understands the process could be the difference between buying your first home and just buying what you can afford for now. We had a foreclosure listed for a bank not long ago that we just closed on. It was a 5 bedroom home in a nice community. When the bank decided to drop the price to $210,000, we had 3 contracts sent to us that day.

# 7 Ugh, Property Taxes

Yes, yes, broken record. BUT this is important. Sometimes, you can reduce your property taxes just by buying a home in a different county. Taxes seem high in Charles County? Try looking for a home in Prince George’s or St. Mary’s Counties. If you’re set on which county you want to buy in, just know that you may want to look at a smaller home or a smaller price bracket to compensate for the higher taxes.

# 8 Something No One Thinks About – Comparison Shopping for Title Insurance

Huh? What? Yes, exactly. Just like any other type of insurance, shop around to get the best quote for your title insurance. Some states even mandate lower rates for a buyer if the previous owner bought title insurance within the last few years.

# 9 Consider High-Deductible Homeowners Insurance

Especially if you are a do-it-yourselfer buying a foreclosure or an older home that ‘needs a little TLC,’ consider going for a higher deductible to lower your monthly payments. If you’re better with a TV remote than a hammer, this may still be a viable option for you – it might not be cost effective to pay higher premiums.

# 10 Lower Your Insurance Even More by Upgrading

Upgrades like installing a security system, smoke alarms, and carbon monoxide detectors can reduce your monthly insurance costs. It also doesn’t hurt to have your home insured by the same place you have your cars, motorcycles, etc. insured. You can usually get additional discounts by bundling them all with one company.

If you’re considering jumping in and becoming a first-time home buyer, or you’re just looking to sell your home and purchase another, contact me today! I’ve worked with numerous banks listing and representing buyers of foreclosed homes and can help you navigate the waters to your new home!