Maybe you’ve bought a house in your day, so you feel like a real estate expert. But even some experienced buyers don’t know everything, though, which is why it’s always good to do your homework before buying or selling another piece of property. It’s time to get real and face the facts, here are five things you probably didn’t know about real estate.
Your Credit Score Is Very Important
Though a mortgage lender cares about how much you make and how long you have been in your job when considering whether to lend to you, the deciding factor may actually be your credit score. People with a high credit score, usually about 720 or higher, get the best interest rates on mortgages, which can save you tens of thousands of dollars in finance costs over the life of the loan. On the other hand, borrowers with low credit scores pay higher rates, and if your score is low enough — usually around 620-640, a lender may not be willing to give you a loan at all, no matter how high your income is.
Your Payment Won’t Necessarily Stay The Same
One of the things that many people tout about owning over renting is that your monthly house payment won’t go up. But this is not usually true. If you have a fixed-rate mortgage, only the principal and interest amount stay the same. For anyone who pays his or her taxes and insurance as part of their monthly mortgage payment, that portion of the payment will increase often.
These days, homeowner’s insurance premiums go up annually, and most taxing jurisdictions revalue property and adjust tax rates every three or four years, so if the real estate market is doing well, you can expect your home’s value and your taxes to go up.
There Are Hidden Costs To Owning Property
You know you have your mortgage payment and taxes and insurance to pay, but most people fail to account for the other costs of owning real estate. Most experts say to expect to pay about 1% of the purchase price annually in maintenance costs. For a $200,000 home, that’s $2,000 a year. These costs include things like fixing a broken furnace as well as routine maintenance like lawn care.
Investing In Real Estate Is A Big Responsibility
Andrew Carnegie, the wealthiest man in America during the early 20th century, once said “90 percent of all millionaires become so through owning real estate.” And it’s true, real estate can be a great investment, although it can also depreciate. And there are also huge costs involved in owning and maintaining a property. It takes quite a bit of capital upfront and continued care to maintain real estate investments. Educate yourself on different types of investing by reading reviews for Success Path or other similar flipping education programs, and start compiling your plan for how to succeed in real estate investments.
If You Back Out, You Could Lose Money
Most times, when you sign a contract to buy a property, you have to put up what is called “earnest money” to show you are serious about the deal. This is to protect the seller against taking the property off the market for someone who is not serious about buying it. If you back out of the deal for no reason or a reason that is not covered in the agreement, you will forfeit this money, so you should be sure you are serious before signing a purchase agreement.
These are just a few of the things you probably didn’t know about real estate. Whether you’re interested in buying a new home or investment property, it pays to work with a First Team Real Estate agent. Let us help fill in the gaps in your real estate goals and get you set up for success.
Content Provided Courtesy of FirstTeam Real Estate
When you click on external links, you are linking to alternate websites not operated by SchoolsFirst FCU, and SchoolsFirst FCU is not responsible for the content of the alternate websites. The fact that there is a link from SchoolsFirst FCU’s email to an alternate website does not constitute endorsement of any product, service, or organization. SchoolsFirst FCU does not represent either you or the website operator if you enter into a transaction. Privacy and security policies may differ from those practiced by SchoolsFirst FCU, and you should review the alternate website’s policies.
Extra Credit provides general information to help improve our Member’s financial lives. Every situation is different, so please contact us for guidance on your specific needs. The advice provided in Extra Credit is not intended to serve as a substitute for speaking to a loan representative, financial advisor, or BALANCE counselor who can help tailor a solution for you.