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Living Spaces Real Estate

Your New Home: How Much Will It Cost?

Sometimes owning a new home instead of renting or living in an older home means adjusting our expectations to our incomes and dealing with hard financial facts even as we dream of the fantasy houses we see in glossy magazines. Many factors affect the cost of a new home, including financing, construction, and local regulations. But there are things you can do to help keep the price within your budget.

The down payment and monthly mortgage payments can often be the biggest hurdle new home buyers face, so shopping around for the right mortgage options can be an important way to save money. For instance, VA or FHA loans sometimes require no or low down payment. There are state assistance programs available for first-time home buyers. Sometimes, first-time buyers turn to parents or relatives for help with down payments. Also, adjustable rate mortgages can help keep monthly payments within your comfort range.

One way to keep the actual cost of a new home within your budget is to do some of the finishing work yourself. While structural construction is best left to professionals, some homeowners do their own painting and woodwork finishing. These jobs certainly are not easy but may be a way to create substantial savings. There is also a wide range of price levels for some materials, such as cabinets, carpeting, appliances, and bathroom fixtures. What people choose to put in their homes is as unique as each individual. The important thing is to weigh your options so your new home is comfortable, affordable, and meets your needs.

Another cost-saving tactic is designing a home so that rooms, such as additional bedrooms, can be added in the future. Some homeowners wait to finish their basement a few years after they move in, when it is financially easier to complete the work.

There are added costs for regulations that most homeowners never consider. Development fees and other construction charges can add more than $12,000 to the cost of a typical home. These fees include inspections and permits, re-zoning applications, wetland permits, access permits, grading, fire-retardant walls, setback requirements, and more. The costs vary from city to city, so the location of a new house may affect its cost.

With all these factors, the most important consideration is the quality of your home. It must be a sound structure that will provide years of worry-free living for you and subsequent owners. Finding a professional builder with whom you are comfortable is a basic requirement in building your dream house. Visit neighborhoods in which you want to live or where there are comparable houses. Talk to owners about their builders to see what their experience was. Professional builders are happy to supply references to prospective homeowners.

Every home buyer chooses the aspects of a new home that are most important to them. Having a home on a lake may be the dream of a boater. A traditional home with plenty of bedrooms and baths on a cul-de-sac in the suburbs: someone else’s dream. The excitement of easy access to the theater in the heart of a city may thrill another. Whatever your dream, thoughtful analysis of what is most important to your lifestyle and your budget will help ensure that the experience of buying or building your new home will be one of the most pleasant times of your life. ■

Keith Grant is president of the Memphis Area Home Builders Association.

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Living Spaces Real Estate

Opportunities abound for the first-time home buyer

For many people, buying a first home is a rite of passage. It’s a foot firmly planted in independence and on the path to success, a true part of the American dream. But as many first-time buyers are coming to realize, it’s more than just the end-goal of a journey toward financial independence. Buying a home, particularly your first home, just makes good plain sense, now more than ever.

Potential first-time buyers may be intimidated by today’s changing housing market. Isn’t it just better to “play it safe” and keep renting in case home prices fall? If you buy now, will you be paying too much?

First, these are valid considerations. Even those who have bought and sold many homes ask similar questions. But the truth is that today’s economic environment makes it an excellent time to buy. Interest rates are low by historical standards, there are lots of choices, and sellers are offering incentives.

Perhaps, as a first-time buyer, you want to wait until prices drop lower. Actually, if you continue to wait, you may never be able to afford to get into the housing market. The truth is, even a small uptick in interest rates can wipe out any gains from falling prices.

Consider this example: If you decide to wait to purchase a home and the price were to drop $10,000 from where it is today, you could still end up losing money. How? If interest rates were to move up half a point during this period, the savings on the reduced home price would be more than offset by the higher monthly payment you would be making over the life of the loan.

Interest rates currently stand at about 6.5 percent and are extremely favorable for buyers. In fact, they are hovering near 30-year lows. But waiting to time the market is a dangerous — and losing — game. Even those who follow the market for a living can’t figure out when interest rates will bottom out. If they could, they would all be multimillionaires. Because interest rates are near historic lows, it is much more likely that they will head higher in the future as opposed to moving even lower.

Now consider the current rental market. During the past few years, many rental units have been converted to condos, resulting in fewer rentals on the market. Less supply, higher prices. Each year, your rent can easily go up 5 to 10 percent. Where is the economic security in that? When you buy a home, you’re also locking in price stability, knowing that you will pay the same monthly payment for the life of your 30-year fixed-rate mortgage. Plus, renting doesn’t get you the investment or tax benefits of homeownership.

The best way to build household wealth is to own a home. Once you do, you are able to take advantage of generous tax deductions, and your equity begins to build. Your home will appreciate in value over the years, and eventually you can use those gains to sell your starter home and afford to move into a bigger house. Remember, it’s called a starter home for a reason. With so many homes on the market to choose from, your best strategy may be to scale back expectations for your dream home. After a few years, you will be able to leverage this investment and buy a larger house.

The truth is, buying your first home just makes good sense. Housing is always a smart investment, and it is by far the best way to use a small amount of money for a big return. Interest rates are historically low, and the selection of homes on the market is plentiful. Do your research and you’ll come to this conclusion: In today’s market, the real risk isn’t in buying a home, it’s sitting on the fence.

Keith Grant is president of the Memphis Area Home Builders Association.

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Living Spaces Real Estate

New Homes: Better Than Ever

As an unsustainably hot housing market slows down to “real time,” buyers are seeking answers to lots of questions about how to find the right home. And while the old real estate saying about the three most important attributes being “location, location, location” still has some truth to it, today’s consumers are more savvy and discerning. Location is only part of the equation: It’s also about conveniences and amenities.

And for conveniences and amenities, it’s hard to beat a new home. Today, new homes are safer, more efficient, and more packed with popular amenities than ever.

Safety

Technological advances mean that today’s homes are safer, because new homes take advantage of breakthroughs in building science. Homes now have advanced electrical systems, hardwired smoke detectors, and fire-resistant construction details. Windows in patio doors and near stairways have tempered glass, which makes them less likely to cause injury if they break.

Efficiency

Home builders also have an ever-expanding array of products and materials to choose from to enable them to make a house more resource-efficient and water-thrifty. Many home builders participate in programs like Energy Star, promoting energy-efficient appliances, and WaterSense, promoting water efficiency.

“Green” building is another new trend that’s getting legs as builders return to age-old practices, such as siting a home to take the best advantage of sunlight and shade, and recent innovations such as solar shingles (not just solar roof panels), light-conserving windows, and insulation made from recycled materials. Innovation and consumer demand are combining to produce a “leaner” home. Technology has changed, and so has the market.

Lifestyle

Today’s new home plans reflect what today’s homebuyer wants: larger kitchens for family gatherings, bigger closets, ample storage space, and more bathrooms. Consumers are seeking greater ceiling heights, more — and bigger — closets, walk-in showers with multiple heads, three-car garages, and outdoor entertainment spaces with fireplaces and grills. And builders are responding with designs that provide these features.

In fact, that’s a big reason why people seek new homes. Consumers want value, but they also want choices. They want to pick their carpet colors, their cabinet styles, their light fixtures, and other design elements that help make a house a home.

The decisions shouldn’t be about whether it’s a good time to buy a home, because home ownership remains the American Dream, despite occasional highs and lows in the market. The decisions should be about personal choice: finding the home that’s right for the buyer. Choosing a new home helps make it a perfect fit. ■

Keith Grant is president of the Memphis Area Home Builders Association.