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How to Buy Your Very First Home Purchasing a home might be the biggest single purchase you’ll ever make in your life, so it’s important to know your numbers before you sign any contract.If you’re prepared to take the leap and get your first home, below are seven tips you should consider: Your Budget This may sound basic, but underestimating the real costs of ownership is a usual mistake.Not only will you have to pay a mortgage, but you’ll need to settle taxes, insurance premiums, and other expenses associated with with owning a home.Currently, a down payment will be around 20% of the purchase price.
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Your credit score has an important role to play in obtaining low-interest financing.Review your credit report and iron out discrepancies before facing your lender. Keeping It Small Amassing new debt before home financing can have a bearing on your debt-to-income ratio and the amount of money you can borrow from a lender.In short, avoid shopping for any big-ticket item on credit, such as a car, if you intend to buy a home in the near future. Doing Your Homework Save time and cash by shopping around–there are tons of websites that can help you with this– to know which lenders have the best interest rates in your area.Comparison-shopping helps you save cash as well as time in the long run, and if you’re talking about a three-decade mortgage, that’s going to be a rather long run. Emergency Savings Many a dream home has grown to be a money pit, costing a lot more money than the owner had budgeted.What’s the picture if your street is flooded or your plumbing requires an overhaul?Prior to the purchase, hire a well-reputed home inspector, and prepare for the unforeseen with money allocated for the unknown. Energy Tax Credits To enjoy energy tax credits, qualify energy-efficient equipment in your home.Thirty-percent of solar and geothermal installation costs can be claimed on your taxes, and that can give you very nice savings. Renovations Although you normally can’t subtract home improvements on your annual tax return, the good news is that these costs can come in handy if you ever decide to sell your home.Just add them to your adjusted cost basis – more basis, less capital gain.To qualify as a deduction, the improvement must add to the material value of your home’s value, lengthen your home’s useful life substantially, or make your home useful in new ways.In computing capital gains, you can also exclude up to a maximum of $250,000 of the gain from the sale or $500,000 if you’re filing jointly. A home can help you build a future worth looking forward to, or break your bank.Know your numbers first, and then buy into the dream.