FINANCIAL GAIN

Owning a home is a valued investment which can have financial advantages. Because homes generally increase in value, each payment you make is an investment in your future. And even if your home doesn’t appreciate much, which is rare, you will benefit from the monthly forced savings that result from paying down the remaining balance due on your loan.

With each monthly payment, you also build home equity – the difference between what your home is worth now and what you paid for it. When you sell, your equity is your profit. This gain can help you purchase your next home, perhaps move up to a larger one. Or you can tap into the equity for college tuition loans or retirement needs at a rate which is generally lower than available on personal loans. Also making payments toward and ultimately paying off a loan is an excellent way to establish a good credit rating.

FREEDOM AND STABILITY

Perhaps the most tangible yet greatest treasure of homeownership is the personal satisfaction in living in a home that you own. You are free to keep pets, plant a garden and remodel or redecorate to reflect your personal style. A home gives you and your family a feeling of stability and commitment.

A special sense of security and satisfaction comes as you begin to put down roots in a neighborhood.

THE FIRST STEP

One of the single most important steps to take before you begin to purchase a home is to evaluate your assets and liabilities and monthly expenditures. Begin by examining your current monthly average spending using the financial outline below. Include everything from housing expenses and transportation to debt repayments and entertainment. As you collect your spending data, think about how a house purchase – including loan payments, insurance, taxes, repairs and maintenance – will affect your budget and ability to save. Are there areas in which you need to cut back to make more room for a loan payment and other homeownership expenses?

CURRENT MONTHLY AVERAGE INCOME

(Include salaries, bonuses, interest income, dividends investments in fund or in shares, or and any other income)

TAXES

• Social Security
• Federal
• State and local
• Capital premium

HOUSING EXPENSES

• Rent
• Utilities
• Repairs

INSURANCE

• Homeowners/renters
• Auto
• Health
• Life
• Disability

DEBT REPAYMENTS

• Student loans
• Auto loans
• Credit cards

TRANSPORTATION

• Gas
• Maintenance
• Registration fees
• Tolls
• Parking
• Bus or subway fares

PERSONAL

• Clothing and shoes
• Dry cleaning
• Haircuts and makeup

ENTERTAINMENT

• Restaurants, movies, travel, etc.
• Hobbies
• Pets
• Health club

HEALTH CARE

• Dental
• Vision
• Prescription drugs

KIDS

• Daycare
• Child support
• Other

SUPPORTED FAMILY MEMBERS

GROCERIES

CHARITABLE DONATIONS

OTHER

TOTAL SPENDING

TOTAL SAVED

The answer to this question is based on two factors: (1) How much you feel comfortable spending on a monthly basis after surveying your budget and spending habits and (2) How much your lender calculates you can afford based on your income and debt obligations.

It is important to understand how a home is financed. There are three crucial elements: (1) a down payment, (2) closing costs and (3) the loan. When you know the amount of down payment, closing costs and monthly loan payments you can afford, you can better determine how much home you can afford.

DOWN PAYMENT

A down payment is the money you pay up front toward the house. The higher the down payment, the lower the monthly payment and interest fees. Fortunately, home buyers today no longer have to climb a financial mountain – saving for the traditional 5 to 20% down payment – before purchasing a home. There are a number of alternate programs available.

GOVERNMENT PROGRAMS

Loans through the Government carry attractive down payment requirements of 5% or less. There is usually a maximum on the amount of money you can borrow.

Closing is when ownership of your new home is officially legally transferred from the seller to you and documented locally. Sometimes sellers will pay closing costs. If not, be prepared to pay an additional two to five percent of the home purchase price. These costs can be generalized into three categories:

• THE COSTS OF BORROWING MONEY: This includes “discount points,” a one-time charge to adjust the yield on the loan to what market conditions demand.
• THE COSTS OF ESTABLISHING A LOAN: These include the loan origination fee, appraisal fee and cost of credit reports. Premiums for hazard and loan insurance are usually paid at closing. Also, prepaid interest will be collected for the period between closing and the end of the purchase month.
• THE COSTS OF DOCUMENT PREPARATION: Title insurance costs pay for the search of public records to determine if the property is free from any other ownership or liens. Recording and transfer fees cover the legal recording of the deed with governmental agencies as well as the transfer of taxes. Check with your local CENTURY 21® office for an estimate of your closing costs.

Unless you’re wealthy enough to pay cash for your home, you’ll need to take out a loan – a loan that you obtain to close the gap between the cash you have for a down payment and the purchase price of the home. The amount of this loan will be decided by the price of the home and your down payment. Getting pre-approved for a certain loan will allow you to know what price range your lender will approve and give you more buying strength.

Lenders factor in sales price and down payment, but place more importance on how much you can handle on a monthly basis. The term of loan, the interest rate and the principal amount of the loan will determine the amount of your monthly payments. The higher the interest rate, the higher the monthly payments. The length of most real estate loans is 15 or 30 years. The following Monthly Payment Chart will help you figure the loan amount you can afford. Note that you must also add property taxes, home insurance costs, and, in some cases, homeowner’s association fees, to these figures for a realistic monthly obligation.

Like many other products and services, numerous loan options are available. They fall into two basic categories:

• Fixed-rate loans indexed in EUR or CHF; and
• Adjustable-rate loans indexed in EUR or CHF.

With fixed-rate loan loans, the interest rate stays the same and your monthly loan payment amount does not change, which makes budgeting easier. The interest rates on these loans are usually a little higher than adjustable loans since the lender is establishing a set interest for many years.

Adjustable-rate loan (ARM) loans have an interest rate that fluctuates up and down throughout the life of the loan, depending on market conditions. The rate could change as often as every month, so it can be difficult to budget. An ARM is an attractive option because it usually starts out at a lower interest rate, which may enable you to qualify to borrow more.

When it comes to ARM loans, an important point to look for is the presence or absence of interest-rate “caps.” Life-of-the-loan caps place a ceiling on how high the rate can go over the term of the loan, often five to six points above the original rate. They are a guarantee from the lender that you will not be required to pay more than the agreed-upon maximum interest rate. Annual caps protect you from extreme jumps in the interest rate in any given year and are usually in the one to two percent range.

Shop around for your loan, and ask lots of questions. Since you will be living with it for many years, make sure to get one best suited to your financial circumstances.

After you’ve determined how much house you can afford and which loan option is best for you, prioritize your needs and wants for your new home. The two main factors are location and style of your home.

It’s true. Location is the most important factor in buying a new home. It will partially determine the price of the home and will be a powerful influence on your lifestyle. Check out the amenities of the neighborhoods you’re considering, and talk to the people who live in those areas. Ask co-workers and acquaintances for their recommendations. And ask an experienced real estate agent for current information on the community’s economic health, schools, crime rates and stability.

Next you’ll need to decide what you want in a home. The first basic choice is between a newly-constructed home and an existing one. If you’re looking to own a home that nobody else has laid claim to and brings with it the latest in style and efficiency, a new home is what you’re after. The downside is that new homes are usually more expensive than homes offered for resale. To many, an existing home that has been well cared for and is located in an established neighborhood is much more desirable than a new home.

You’ll also need to choose between a single family home or a condominium/co-op. A single family home gives you the most privacy and is generally more spacious. Plus it comes with a yard. Condos and co-ops free you from the burden of general upkeep and provide common areas with pools and other recreational facilities. They are also usually more affordable, but monthly maintenance charges exist with these options.

THE WISH LIST

Narrowing your search to homes with specific features will save you time during the house-hunting process and help your sales associate find homes just right for you. Use this list, or create your own, to define your future home. Of course, your final selection will likely require compromise.

Here you can download PDF file of wish list

Finding your new home can be a rewarding experience, especially when you have a CENTURY 21 real estate agent at your side, working and negotiating on your behalf. Some people choose to find a home on their own, but a real estate agent will have many up-to-the-minute listings available that may not appear in the newspaper or on the Internet, and can save you lots of time by screening for properties that best suit you.

Selecting the right real estate office is an important decision. As the world’s largest real estate sales organization with approximately 8,800 independently owned and operated franchised broker offices in more than 60 countries and territories worldwide, the CENTURY 21 System has continuous access to all the latest properties available through its expanding network, advanced technology and participation in the Multiple Listing Service. Plus, CENTURY 21 real estate agents have the skill and knowledge to supply you information on home values, taxes, utility costs, neighborhoods and financing.

We know that you’re looking for more than just a roof over your head. You’re looking for a place to express your lifestyle and values, a place to spend time with family and friends, a place to retreat at the end of the day. That’s why we learn what is important to you and search until you are completely satisfied.