Financial Tips for Homebuyers & Prospective Homebuyers.

A colleague on the other side of the Land shared this information with me, and I thought there was a lot of good info there:


Financial Tips for Homebuyers & Prospective Homebuyers.

On June 2nd, on her radio program, “Eye on Real Estate with Dottie Herman”, Dottie Herman, CEO of Prudential Douglas Elliman, one of New York’s premiere residential brokerages, featured guest Eric Tyson, a personal finance expert, an economist and a bestselling author.

During the interview, Dottie asked Eric if there were some key financial tips (from Eric’s books) that will help you, whether you are thinking about purchasing a home or if you have already bought your home.

FOR THE PROSPECTIVE BUYER

• Your Personal Circumstances – nobody knows your situation better than you do. You know what loans you have to pay back, what it will cost to put your kids through school, to care for elderly parents, etc.

• The Affordability – this is a great time to buy a home but you must take an honest and serious look at your overall financial situation to figure out how much you can realistically afford to spend. Use a worksheet to help you make your decision.

• YOUR Comfort Level – What will you be comfortable with (be realistic)? Your decision making process should be as stress free as possible.

• Research – Do your research. You may or may not need to use all of them, but you can use an expert, who is effective and up to date on all the latest changes in the law - real estate agent, mortgage broker, a real estate attorney (to check the documents), an insurance agent and a financial planner (to assist you plan financially). Be responsible. “Learn enough so that you can evaluate these people and make “a good hiring decision”.

• Mortgage Insurance –Buy a classic life insurance policy as opposed to buying a mortgage insurance policy, recommends Tyson. “The life insurance decision comes down to how many years worth of your income are you trying to replace?”

• “Take Time to Smell the Roses” - Tyson mentions this in reference to Buyer’s Remorse. This is probably the biggest decision that you will make in your lifetime. “It is extremely important to buy something within your comfort level and to practice self – preservation in the process”.

FOR THE HOMEOWNER

Congratulations on taking that giant step to purchasing your own home. Now that you've signed on the "dotted line" and it's a done deal, the handholding is over even though you may still need a little guidance.

• Beware of Solicitors - they want to offer solutions by attempting to sell add on services and products.

• Effective Financial Planner – should do just what the title indicates, help you plan your financials for the coming years

• Electronic Payments – late payments, missing payments, can be quite detrimental to your credit score and can affect future interest rates. Tyson said that he is wary of this but electronic payments are the way to go. “Clearly, automated payments ensure that they are going to be sent on time.”

• Home Receipts – Hang on to ALL of your homeowners documents. Always put them in a place that is easy for you to remember. This is especially helpful for long time homeowners who live in a ‘high cost area’ like New York to “minimize the capital gains tax, should you sell for a profit”.

• Set Aside Cash – Or as the elders used to say “a rainy day fund”. Is there a standard rule of thumb for emergency funds? How much is enough? Tyson stated, “the minimum you want to set aside is 3 months of living expenses. “ If things are more volatile, you should consider at least 6 months worth of living expenses”.

• Tax Assessment – Pay attention to your property taxes, especially if you live in an area where taxes are reassessed periodically and your home value is based on current market values. You can protest your property taxes, “sometimes local towns and municipalities get it wrong”.

• Refinancing – With interest rates so low, people are asking should they refinance. Historically, the motivation to refinance was due to the ability to save money. Refinancing is “a situation that is complicated by all the financing options available”. What you need to determine is 1) is this a worthwhile trade-off? and 2) how many years will it take me to recoup the financing cost (refinancing always cost you money)?


These are just a few helpful tips to help make you aware of what you need to know about buying a home and after you have bought your home.

Eric Tyson worked as a financial advisor in the 1990s, assisting large Fortune 500 companies. Two of Eric’s five national best sellers are “Personal Finance for Dummies” and “Investing for Dummies”. He is the only person to have four out of those five books published simultaneously on Business Week’s book bestseller list.

I hope some of these tips may be of help to you at some point,
Thanks,
Francis

Silicon Valley Real Estate

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