Even with the scars left by the housing mess, homeownership is still a goal for many.
If you vowed to make your homeownership dream come true in 2012, it’s time to get started. The timing may be ideal. Prices appear to have bottomed out in many markets, and mortgage rates are at their lowest ever.
But don’t jump in too quickly. Being ill-prepared financially can cause lasting damage.
It will take years before the housing market is back on track. In 2011, sales totaled 4.26 million. That was up slightly from 2010, but far below the 6 million economists equate with healthy markets.
That gives prospective home buyers a chance to get their plans in order before taking the plunge.
First, make sure you’re really ready to buy. That’s more than a financial calculation. Consider if you expect to remain in the same city for several years. Ask yourself if you’re ready for the lifestyle change that comes with owning. Will you be able to handle simple maintenance or can you afford to call someone if a drain clogs?
At organizations like NeighborWorks America, www.nw.org, you can learn the basics.
Second, make sure you pursue the right type of home for you. There are benefits and pitfalls to various types of ownership. Co-ops and condos, for example, can relieve owners of the responsibility for tasks like shoveling snow but require collective decision making for even small items, like rules on holiday decorations.
Single-family homes offer more freedom and control but place the burden and the costs on the homeowner. Here are some tips to get started:
Shop around for a mortgage. You should visit several banks and credit unions to find out what mortgage amount you may qualify for, before you get your heart set on a home that’s out of reach. Banks want substantial down payments - 20 percent is again considered standard. Make sure any home fits your budget; property taxes and insurance will be part of the monthly payment.
Expect competition. It’s still a buyer’s market, but prices are rising in parts of the country. And one in five homes sold in 2011 was purchased by an investor. Many buyers from other countries are making purchases, often in cash.
Educate yourself on inspections. They can uncover major problems that might convince you to search for another house or bargain down the price. Radon gas, toxic mold, termites and other pests, asbestos, and lead paint are not typically included.
- The guide for first-time buyers produced by NeighborWorks America has tips and tools at www.keystomyhome.org. The Department of Housing and Urban Development has advice and links to programs in your state at www.hud.gov.
- The “Money 101: Homeowning’’ series of podcasts by American Public Media’s “Marketplace’’ programs covers details from finding a good real estate agent to what you need to know about buying a foreclosed property. Find them at iTunesU.