Owning a home can be a difficult decision, one that requires the instinct of a psychologist, financial shrewdness of a banker, the property knowledge of a real estate agent, and the building skills of a contractor.
Yes, it seems like a headache in becoming a homeowner but it is a positive step towards the right direction.
If you enter the real estate market with an understanding of the game and what you can afford, then you will do well. But if you let prestige dictate your expenditures, you will run the risk of failure.
Home ownership is at an all-time high as Kenyans seek for security and comfort. It is also perceived as an investment for its owners.
With so much riding on your home, you will want to save money wherever you can, as I always say: where you save money, you make money.
Tips on how to become a homeowner for less
#1: Study Your Local Market
Mostly, the price of your house determines your financial situation. In a boom period, homeowners are rich with equity; but during lean years, it can be a real struggle.
As a buyer, you will have to consider whether you are in a boom or lean period. If you are in a boom period (as we are in), the danger is that you will pay too much for the house. Even if you plan to stay in the house for a long time, this can be a problem, since a burst bubble could mean that you are paying off a high mortgage on property that is now worth half that amount.
In contrast to the boom period, you may be buying while money is typically harder to come by. As a buyer you can make huge profit because you will be buying well below value.
The solution is to know the state of your local housing market and plan accordingly. That may mean buying a less expensive house, but it can make the difference between keeping that house and losing it!
#2: Do Window Shopping
Before you sign on the dotted line, look around for competitive sale prices for the same type of a house in the area you want to live in. No two houses are exactly the same, but knowing the prices of comparable houses will always help you determine if you are paying a fair price.
You can find comparable prices for houses either by using a real estate agent or doing your own research. This can mean talking to people in the area or checking house listings in the local dailies.
#3: Be Mortgage Wise
The real cost of a house is rare in the price tag. The better your mortgage, the more you will save.
There are many lenders to choose from but the only deciding factor will be the rate. Never assume that all quotes are the same. Go around different housing finance providers and find the mortgage that suites your pockets.
Investigate different types of mortgages as they come in different shapes and sizes. The industry works on two basic models, offering loans for either a number of year's duration, with either fixed or variable rates.
Those loans work best for most people. However, some models work better for guys who have irregular income.
For example, If you can be certain that you will come into money in a set period of time such as a trust fund, a balloon payment may save you money. A balloon payment allows you to pay all or a great deal of a mortgage off at a given time; in exchange, you get lower monthly payments and save on interest payments. This is because balloon mortgages pay out before standard mortgages.
Note: People also look for balloon mortgages when they are looking to resell a house quickly for profit.
The advantage in that is that you hold the house for a brief period of time (usually when the market gets or stays hot and you renovate) while making minimal mortgage payments. The buyer "flips" the house before the balloon payment is due. Of course this kind of a deal has its own risks.
#4: Get a Fixer-Upper
A house is both a place to live and an investment. As with any investment, you want to buy low and sell high. One of the best ways to buy low is by finding a fixer-upper also known as a starter house.
Houses come in all conditions, but it is fair to say that a house in poor condition will always sell for less.
If you can find such a house and are willing to make repairs, you may find yourself sitting on a goldmine. After all, as your house increases in value, your equity will grow, allowing you to realize a profit upon sale.
#5: Be Your Own Agent
A home sold privately will always be cheaper because you are not paying real estate agents a commission.
Those commissions are usually between 0.5 and 1.5% of the total sale price, so we are talking about serious money! For their %, a real estate agent provides a variety of services. When it comes to locating the right house and making an offer; you will find that with a little bit of homework, you can replace your real estate agent.
However, when it comes to the actual sale, you and the seller may want to involve an agent or attorney to make sure that all papers are in order to avoid being conned.
Still, if you are using the agent or attorney to cement the deal, you and the seller can save money by using the same attorney or agent. In other words, you will save because you will not be paying for redundant services.
#6: Land Rates
It is wise to be aware of the yearly land rates charged by the City Council which is minimal but cumulatively it may be costly if you don't pay on the agreed timing.
Remember:
The cost of a house is NEVER just the asking price. More on these secondary costs read http://profsmythe.blogspot.com /2011/02/4-ways-to-be-aware-of-secondary-costs.html">4 ways to be aware of secondary costs when becoming a homeowner
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