Monthly Archives

January 2015

Budgeting for a new home

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Budgeting For a New Home 

After years of student income and tight expenses, it can be tempting to throw caution to the wind and operate without a budget, upon completing medical school or your residency. This would be a big mistake, because history shows that as income rises, so do expenses. No one has limitless funds to buy everything you want. When transferring from a low income to a substantially higher income, prudence will be rewarded 100 fold.

For physicians who move from living off student loans to a much higher income, nearly any increase can make you feel wealthy. You want to buy a new home and fill it with new furniture. More than ever before, there is a bigger need for a budget, now that you have discretionary income. Gaining budgeting skills will lead to financial success no matter where your career leads.

Assess your expenses. A budget consists of two basic parts, income and expenses. Expenses are further broken down into fixed and discretionary (or variable). Fixed expenses, remain the same each month, and include rent or mortgage, car payments, student loans, and other fixed debt payments. Fixed expenses can include some utilities like the cable or cell phone bill. Electric bills, food, gas, and entertainment are variable and change from month to month. Ideally you want your fixed expenses to be around half of your budget. The fixed bills you have less control over than discretionary bills.

Assess your income. This addresses how much pay you bring home. Be sure to subtract out expenses that are deducted from your pay which might include insurance premiums, retirement, and other benefits provided by the company. Take home pay is what you will have to spend so that is the number to focus on. Be sure to carefully look at tax deductions, insurance options and retirement spending. The sooner you pay into retirement the faster the money will grow and paying yourself first is an essential part of budgeting.

Make thoughtful decisions about a final budget. Once everything is on paper it is easier to see where your income is spent. If you are unsure keep an expense journal for a month. Another method is to put every expense on a credit or debit card for 30 days and then closely examine the bill. The one catch to this is purchases as general stores like a Walmart or Target, does not identify the actual purchase. Matching your actual spending as closely as possible will create a budget you can both keep and adjust.

Maintain the budget. It is one thing to write down where you want to spend money. It is another to actually track the spending and keep the budget. Fortunately, online tools are available to keep track of your budget. Some can also connect with your checking account to help you maintain the budget on an ongoing basis.

If you set up and maintain a budget before you finish medical school or your residency then you will be more prepared to purchase a home. As your pay substantially increases, you will have the skills to better determine how much house you can afford when it comes to taking on a mortgage payment.

Build a budget with a new mortgage payment. If you are just finishing school or your residency it might not be possible to live several months setting aside what you want to spend on the mortgage. However, if you have kept a budget for three to six months before looking for a home, you will have a clear understanding of your expenses, and those that will be coming up, to get a feel for what you can afford. It will also give you a chance to save money for both a down payment and moving expenses.

Include more than just the mortgage. Often first time homebuyers think the only cost to home ownership is the mortgage. Buying a larger home you come with higher utility costs. Also include a budget for home repairs. No longer will you be able to call a landlord if a pipe breaks or the plumbing backs up. As a homeowner, it now becomes your responsibility. Setting aside funds each month to cover unexpected home repairs will keep your budget in tact when these expenses arise.

Buying your first home is an exciting accomplishment. If you take time to financially prepare and budget for the changes, you will be able to make the adjustments smoothly.

Choices choices so many Real Estate Agents

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How to Choose the Best Real Estate Agent

Real Estate agents have a wide range of expertise and approaches to real estate purchases. Finding an agent you can trust, will listen to your needs, and will work to find you a home will create a strong relationship. Purchasing a home can last anywhere from 30 days to 6 months or longer. This is a relationship that is very important because the home purchase is usually the most expensive purchase you have ever made. Finding an agent who understands your needs will provide a smooth experience.

An Agent You Can Trust

Intimate discussions about your financial circumstances are generally reserved for the lender, however, the ability to be open with your real estate agent will save time and keep your search focused. Common questions that impact your home search might include: Will your family be expanding? Do you anticipate needing room to care for aging parents? How long of a commute is acceptable? Do you enjoy doing home repairs, yard work, or gardening? Do you want a large back yard for children to play or will close proximity to a local park do?

These types of questions are very personal but will guide the agent to find homes that meet your needs. The vaguer you are, the more likely you will see a lot of listings that are not contenders. The better your agent understands your family dynamics, the better they will be able to find you the right home.

An Agent Who Listens

Perhaps the most important quality of a real estate agent is one who listens. They can help you sift through your must-have list and connect it with the inventory of homes currently on the market. As a new physician, or one still in residency, your first home purchase will not have everything you dream of. A good agent will take time to understand your wants and needs and help you identify which ones are most important. Purchasing a home has tradeoffs. A larger lot, for example, may require a longer commute. A home close to downtown, may mean smaller square footage or fewer modern amenities. Price will be based on location and amenities with budgets and priorities dictating which tradeoffs you are willing to make and the order of priorities. An agent who helps you establish realistic expectations will also be able to help you find a home you love.

An Agent Who Works to Find a Home

Every buyer hopes to locate the perfect home on the first day. The reality is that it often takes much longer. Having an agent who respects the price range your physician mortgage lender has discussed and is persistent in looking for homes, will find success. Good agents communicate with listing agents and know which homes are coming on the market. This can give you a first look at new listings and help you put an offer on the right home when it becomes available. They can also help you tweak your must-have list to meet the housing inventory available.

Stays in Contact after the Contract is Signed

Once an offer has been accepted you will have a lot of contact with the lender. However, you want to stay in contact with your real estate agent as well, because there is still a lot to be done before the closing. The agent can arrange for you to be present during the inspection and other key elements of the underwriting process. They will continue to be a liaison between you and the seller for any information the lender needs or questions that come up that can impact the sale.

Finding an agent who understands your needs will reduce stress and create a smoother buying experience. Agents are also an invaluable resource when it comes to contacts and information needed to help you settle into your new home and new city.

Advantage of Using a Real Estate Agent

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Advantages of Using a Real Estate Agent

With the abundance of resources available online it can be tempting to find and purchase a home without the assistance of a real estate agent. Gaining a better understanding of the real estate purchase process will highlight the advantages of securing your own personal buyer’s agent.

How Does the Real Estate Agent Get Paid?

The first misconception with regard to using a real estate agent is that the buyer can save money by working without an agent. The truth is that both the buyer’s and the seller’s agent are paid by the seller. The buyer will pay the same amount for the home, with or without representation.

Real estate agents serve in one of three capacities. The seller’s agent will represent the seller and the buyer’s agent will represent the buyer. If the buyer does not have an agent then the listing agent will act as a dual agent, meaning they represent both the buyer and the seller. This puts the agent in a more neutral capacity, but not one where the agent is actively working for the buyer.

When the seller lists the home with an agent the agency fee that will be paid by the seller, is negotiated. Sometimes the seller’s agent might discount their fee, other times the fee to both the buyer and seller’s agent will be discounted. This is strictly a seller negotiation. Generally the real estate transaction fees range from 5% to 6% of the sales price and is divided between the buyer and seller’s agent.

What Are The Responsibilities of The Real Estate Agent?

Finding Properties. A buyer’s agent is working for you. A good agent will take the time to get to know you and the needs of your family. They will then search for listings that meet those needs.

Online MLS listings makes it easier for buyer’s to complete this task as well. A buyer’s agent however, knows the market they serve. They can steer you towards neighborhoods in locations where schools and amenities are what you are looking for. They will also know about listings that are about to hit the market, but not yet active. This can give you a key advantage of being the first to see homes that meet your needs.

Valuable Resource. When moving to a new city, the right resources can make the move a lot easier. Agents are well connected within the community and can provide valuable resources. They know the best neighborhoods, how long commutes take in real time and have an understanding of property values and neighborhoods of interest. They will be able to guide you to information like new construction projects or scheduled road upgrades. They can provide historical and neighborhood data which will help you assess location and other elements that impact real estate values. There is more to a home purchase than a great floor plan. Buyer’s agents are plugged into all of the moving parts that impact a neighborhood and home values.

Negotiations. Along with providing recent sales comparisons, a real estate agent may have contacts with inspectors and repair men that can give you accurate estimates on improvements you want to make or repairs that are needed. These cost estimates will help you negotiate a fair price for the home you want to buy. The better the real estate agent knows the current market and the price trends, the better you can negotiate a price on the house you have fallen in love with.

A good real estate agent will be extremely valuable in helping you to obtain a home with strong resale potential. As you start your career and purchase your first home, you will want to consider resale value. As your physician’s practice grows, you will eventually want to upgrade to a larger home. With the agent fees paid by the seller, there is no reason not to utilize this valuable asset.