If you are buying a home for the first time, it can be an emotional rollercoaster. On the exciting side, you are buying a home to live in and joining in on the American Dream. On the down side, you are committing to the payment of more money than you probably have ever made in your life, which can lead to sleepless nights till you get used to the idea. To keep things in control, it helps to know a bit about certain terms you might run into the first time.
When buying your first home, you are undoubtedly going to take out a mortgage. There are a lot of issues that go into mortgages, but one is particularly important. In that vast swath of paperwork, there is a clause talking about acceleration. We are not talking about a car. Instead, this is the clause that lets the lender demand that you immediately pay the loan in full. Don't panic. This can usually only happen if you miss payments, but make sure you read the clause to understand exactly where you stand.
On a more positive note is the idea of the cost basis of your home. This one is all about tax, particularly tax deductions. As far away as it may seem, you will actually sell the property one day. When you sell it, you have to figure out your tax on any profit. There are lot of things that go into that calculation, but it is important to understand that any improvements you make to the home while living there are added to your initial cost to come up with your deductible amount. In practical terms, this means save every receipt related to home improvements and repairs. When it comes time to sell, you will be glad you did.
Finally, we will end with something positive that you will want to keep track of on a yearly basis. Owning real estate is all about return on investment from a financial point of view. To get a big smile on your face, just calculate the value of your home each year and divide by the value at the end of the previous year. For most people, this is the most fun they will ever have doing math.
Real estate can be overwhelming when you first get into it. This shouldn't keep you from jumping in feet first.
