Real Estate Investing

There seems to be a common social stigma attached to renters, one of financial instability and ignorance. This may be true for some, but certainly not all renters. The simple fact remains that some people are simply not at the right point in their lives to buy a house. The right time differs for everyone, as it can certainly be affected by personal matters. However, there are some key signs to watch for that signal it might be the right time to make the leap into homeownership.

Your mortgage payment would be close to your current monthly rent. If you are managing to get by with a fairly hefty rent payment, you could have a comparable home for the same amount or even less per month. This is especially true when it’s a buyer’s market or that house you’ve had your eye on is still available after several months. Seller desperation works to your advantage.

Your debt is getting smaller. When you are paying off debt, your credit is improving. This helps you secure a loan with a better interest rate. Plus, the last thing anyone wants is to be knee-deep in debt when trying to meet all the unexpected financial obligations of moving and settling into a new home.

Your income is going up. Pay increases, promotions, or more sales accounts and bonuses are always a good sign that a major life change like buying a house is within reach. However, ensure that you are putting the sudden increase in “disposable income” to good use, which leads us to our next point.

Your spending habits are coming under control. Financial discipline is a sure sign of maturity and readiness to take on the responsibility of homeownership. Far too many people buy a house before they’re ready. They lack financial discipline to manage the balancing act of home, living and other expenses. They may begin using their home mortgage as an ATM machine, taking out home equity loans. Or else they may consolidate all their revolving credit loans, like credit cards, into the home loan. None of this addresses the behavior of undisciplined spending. Financial discipline is a must - that means the resolve to make a plan for your money and the determination to see that plan to completion.

You have saved, saved and saved some more. This is another area where far too many people buy before they’re ready. Their home’s maintenance needs fall by the wayside as the money must go to other areas. Eventually, their home may be in such disrepair that their home equity is nil. You must save enough money to handle the necessary upkeep. Then there are closing costs, and a significant downpayment of 20 percent or more will help you pay off your house faster, increase your home equity, and help you escape private mortgage insurance.

Buying a house is a huge commitment. Before proceeding, consider CNN Money’s “Four Questions Homebuyers Should Ask” and MSN’s “Three Worst Reasons to Buy a Home.” Run the numbers honestly and even with an exaggerated financial cushion that will provide for unexpected “uh-ohs”. Follow your gut instinct and decide whether this is the right step for you before you begin touring homes, lest your opinion be swayed by emotion.

CNN had a great story recently about saving money when buying a house. Guess what the number one tip was! Go Prefab! Seriously, there are some impressive offerings in the prefab housing market nowadays. It is worth getting excited about. Even as these homes move discretely from the rural landscape into metropolitan areas, and out of impoverished areas into trendy, upscale areas of town, there are still many stubbornly held misconceptions about their appearance.

Take, for instance, a recent conversation I witnessed.

Person A: Strong winds would just sweep those houses away.

Person B: Well actually, they’re built with 30 percent more materials on average to be able to withstand the stress of transport and crane lifting. They’re actually a lot more durable.

Person A: Well do they all have siding or can they do brick?

Person B: They do brick! They do fireplaces! They look just like traditional houses!

Person A: Two stories?

Person B: YES!!

Pre-fab can be built for at least $20 less per square foot than a traditional stick-built home, especially if you do most of the extra work yourself. You might also have friends who can do that work for you at a discount rate. The workload for prefab home buyers includes things like grading, excavation and overall site prep, as well as plumbing and electrical. However, CNN points out that financing prefab homes might be difficult. True, they are the talk of the housing industry lately, but lenders are still leery.

“Keep in mind that it can be difficult to convince bankers to issue mortgages for prefab homes. Look for advice from the companies designing and building these homes, many of whom have developed special arrangements with lenders.”

CNN also recommended buying a fixer-upper, and recommends Fannie Mae’s Homestyle loan program as a means of funding the home purchase and the improvements. This is a good idea as long as the house has “good bones,” meaning it is structurally sound with reliable HVAC, electrical and plumbing. Other things like kitchen, bath, and even roof or siding, can be fixed up. As About.com points out, the location and layout of the home are also very important in boosting appeal upon resale time.

Money 101 blog also offers some great information on places to watch to know when it is a buyer’s market and the time is right. Of course, this depends on the individual’s situation as well. Just because interest rates are down and you’ve found a great deal on a house and the stars seem to be aligned in your favor, it doesn’t necessarily mean you should move forward.

Try to eliminate as much debt as possible first and save up a sizeable down payment. Double and triple check your monthly payments, including homeowner’s insurance, property taxes and private mortgage insurance, if applicable. Can you really afford this property? Your mortgage payment should ideally be about 1/4 of your monthly take-home pay, and even that is too much for some homebuyers. Bottom line: Be wise, be savvy, be open-minded and be patient. Chances are good you’ll wind up being happy.

Housing plans are the fun part of building a home, the seed that starts the dream. You may be flipping through a Southern Living magazine, for instance when you discover suddenly that it is their housing plans issue. Nary a thought had entered your mind before this point in time, but you are suddenly obsessed. You can picture yourself sitting on that wrap-around front porch with coffee in hand, listening to the birds sing in the trees on the perfect piece of land you’re going to find. I know, I’ve been there.

Though housing plans are a good place to start, there are tons of other considerations before breaking ground on a home. The housing plan phase is undoubtedly important, however. In browsing the endless catalogs and web sites selling house plans, it is easy to get snowed on the square footage or some other technicality, a mistake that could cost thousands of dollars to fix. Of course, hiring an architect is always an option and may be worth the extra cost just to have someone in case of emergencies to “talk the language” with all other involved parties.

About.com offers a superb list of things to consider when browsing building plans. They include:

Buy a plan that suits the land: Contrary to the advice of some builders, this article suggests picking your land first and then your house plan, not the other way around.

Homes can be changed: If your house plan doesn’t have a porch, don’t despair. It can be added. The entire exterior can quite easily be altered to look completely different, in fact. It is recommended that you look hardest at the home’s interior, because altering the interior is where the big bucks come into play.

Blueprints can be changed: According to this article, almost all pre-designed blueprints purchased from any given company require changes of some sort. The buyers may want a larger garage, a fireplace, a larger front porch, etc. It can be done, though the blueprints should be as close to ideal as possible.

Other tips include keeping an open mind, stop shopping for the perfect house (it doesn’t exist), and envision a home’s hidden potential. Don’t view how it looks now, view how it can look eventually with a little TLC. As far as places that carry stock plans, look for lumber suppliers (especially national chains), Southern Living and similar magazines, pre-fab home companies and tons of Internet web sites.

Good places to seek out that perfect plot of land for your dream home include:

Real estate agents: They can give you the skinny on new or upcoming listings before the information even pops up on the MLS.

Internet: Use the search engine terms “land for sale” or “lots for sale” and specify the desired town or geographical area. You may be surprised at what information is available.

Newspapers: Never underestimate the Sunday edition classifieds.

Government: Look through legal plats in local government offices.

Foreclosure lists: Land bought at auction can be a real steal, but be prepared to pay cash.

Other sources include drive-by searches, word-of-mouth, real estate magazines and home builders and developers (by phone or web site). Happy hunting!