Buying your first home is an incredibly exciting time, but it can also be a frightening one, especially when considering the cost associated with such a purchase. But before you apply for a mortgage, there are a few things you should know first. Understanding the process will help you make a more informed decision and get the most out of your mortgage.

Here are a few mortgage tips that all first-timers should know.

1. Don’t Take Out the Amount You’re Approved For

The amount that a lender agrees to loan you isn’t necessarily the amount you should agree to take out. Just because you’ve been granted approval for a certain amount of money doesn’t mean you should take it. In fact, you’d be wise not to. Instead, you might only want to take out a fraction of what you’ve been approved for.

If you spend the limit of what a lender is willing to loan out to you, it’s very possible that you may find yourself with a very tight budget to balance. And if you experience any negative financial circumstances in the near future, you could find yourself in a tough spot.

Lenders use your gross income and debts to assess how much you would be approved for, but they don’t factor in your lifestyle and spending habits. There are a ton of other expenses to cover that aren’t necessarily accounted for in the financial documents that you provide to your lender, such as travel, entertainment, daycare, extracurricular activities for the kids, and so forth. Your lender won’t take all of these extra costs into account when determining how much to lend you.

Stay well below your mortgage approval limit to give you a financial cushion to fall back on and to avoid maxing out on your ability to pay all of life’s expenses.

2. Save Up a 20% Down Payment to Avoid Extra Fees

Homes are incredibly expensive these days, so saving up for a down payment that’s 20% of the purchase price can be a tall order. But it’s not impossible, and the benefits of spending the time saving up for a hefty down payment are well worth it.

Putting down 20% means you’ll avoid having to pay private mortgage insurance (PMI). This policy is meant to protect your lender, not you, but you’ll still be paying the fee anyway. The lower the down payment amount, the higher the perceived risk to lenders. As such, an insured mortgage is meant to protect lenders in case borrowers default on their mortgages.

Unfortunately, you’re the one stuck with this fee until you’ve managed to pay down your mortgage balance to 80% of the property’s original appraised value. Until then, you’ll be paying anywhere between 0.5% to 1% of the loan amount on a yearly basis. On a $500,000 mortgage, for instance, you would be paying $5,000 per year based on a 1% PMI rate. That’s a lot of money that you could have otherwise sent elsewhere.

If possible, try your best to save up as much money as you can to be put towards a down payment. This will help you avoid throwing your money away on these extra insurance fees.

3. Take Measures to Boost Your Credit Score

Your credit score plays a key role in the interest rate that your lender is willing to offer you. The higher the rate, the more you’ll be paying. Even just a half of a percentage point on the interest rate can save you a ton of money.

For instance, a $100,000 fixed-rate mortgage on a 5-year term would cost you $53,405 in interest over the life of the loan base don a 3.7% rate. Slightly lowering the rate to 3.0% would cut down on interest to $42,250 over the life of the mortgage. That’s $11,155 in savings.

Besides paying less in interest, borrowers with a higher credit score have a better chance of getting approved for a mortgage. Generally speaking, lenders are seldom willing to approve borrowers who have a credit score of less than 620. If your score is currently less than that, now is the time to take steps to improve it.

Be sure to pay all of your creditors on time and in full, every month. Pay down as much of your credit card balance as you can instead of just making the minimum payments. And don’t take out any new debt, which will only increase your debt load and potentially have a negative effect on your score.

Making an effort to increase your credit score will help improve the odds of mortgage approval at a lower interest rate.

4. Budget For More Than Just Your Mortgage Payments

Your mortgage payments will probably be one of your biggest bills to pay every month, but they won’t be the only ones. Owning a home is an expensive endeavor that involves a lot more than just paying your mortgage. There are a few other costs associated with running a home that you should budget for.

Utility bills, new furniture, repairs, maintenance, and other costs will need to be covered. For this reason, it would be wise to come up with a workable budget that factors in all the fees associated with operating your home. Make sure you’re comfortably able to cover these extra costs in addition to making your mortgage payments every month.

5. Get a Mortgage Pre-Approval

Don’t start looking for a home until you’ve spoken with a mortgage broker and have been pre-approved for a mortgage. Doing so will help you identify how much you’ll be able to afford, which can help you narrow your focus on properties that fit your budget. Otherwise, you could be wasting your time looking at homes that are a lot more than you can realistically afford.

In addition, having a pre-approval letter in hand will show sellers that you’re a serious buyer and are financially capable of securing financing to make a home purchase. Sellers don’t want to take a chance on a buyer who may or may not be able to get a mortgage to close a deal. Those who are pre-approved stand a better chance of mortgage approval.

6. Shop Around

Consumers tend to look around and comparison shop before they make a purchase. After all, they want to make sure they’re not spending any more for a particular item than necessary. The same can be said for mortgages: by shopping around, you’ll be able to find the right lender who will offer you the right home loan package best suited for you.

Failure to shop around for a home loan can cost you. Without considering different interest rates, terms, and fee structures from different lenders, you could be missing out on significant savings. As mentioned earlier, a slightly lower rate can mean the difference of thousands of dollars over the life of the loan. That’s why it’s so important to scope out several lenders and see what they have to offer before settling on a deal.

The Bottom Line

As a first-time homebuyer, you’ll most likely need a mortgage to help you finance a home purchase. But you shouldn’t go into the process blindly. Instead, get acquainted with the mortgage process in order to take the right steps and make the best decision regarding your financing. Long before you start house hunting, speak with a mortgage specialist in depth to find out what you can do to put your best foot forward and set yourself up for success.

Your home should ideally be a safe retreat that you can feel comfortable and tranquil in, no matter what’s happening in the outside world. Interior designers go to great lengths to try and create a space that’s not only stylish and visually appealing to homeowners’ tastes, they also strive to create a home that provides a sense of balance.

That’s exactly where “feng shui” comes into play. It’s this ancient Chinese art and practice that aims to allow the natural flow of  “chi” or “qi” – the life force or material energy of the universe – in a space. Feng shui offers a specific way to fill a home with this balancing energy, and it’s done by incorporating five essential elements: wood, fire, earth, metal, and water.

1. Wood

Incorporating wood into the home is easy enough, given all the furniture pieces and decorative accessories available in this natural material. But not only is wood esthetically pleasing to the eye, it also evokes a sense of tranquility and balance when introduced into the home environment.

The wood element is associated with health and prosperity, as well as natural growth. It represents a new start, which makes it an ideal element to add to a new home. Wood is intricately related to two other feng shui elements: fire and metal. While wood feeds fire, metal controls wood. It’s this dynamic relationship between these three elements that helps bring balance into a space.

When it comes to color, anything in the green or brown families works well for the element of wood. To bring wood into your home, consider adding houseplants, wooden bowls, and wood shelving. And as for shape, anything with a rectangular or columnar contour works well. For patterns, anything with vertical stripes can add some vibrant energy into a space.

2. Fire

The element of fire is all about high energy, emotion, passion, and creativity. It’s also associated with reputation, fame, integrity, and the way in which your inner light shines. Given these attributes – as well as its physical aspect – it should come as no surprise that the color associated with fire is red, along with related hues such as bright yellow, orange, and pink.

A simple way to infuse fire into your home is by simply illuminating it with lights, candles, and even a wood-burning fireplace. You may also add elements into your home’s decor that feature triangular shapes, which are also associated with fire. Things associated with life and living beings – such as animal prints or photos of real people – also add to fire.

Essentially, anything you can bring into the home that features some form of light and red color palette will help add the element of fire to contribute to your feng shui interior.

3. Earth

Stability, sustenance, knowledge, and support are all traits of earth in the realm of feng shui. The element of earth helps to create a sense of grounding when outside factors cause instability. It’s curative and healing in a way and brings back a level of control in a world that can often feel disorderly. The earth is meant to offer a sense of support, especially during times of chaos.

The square shape is most appropriate, as it’s the shape with the most stability. More specifically, flat, horizontal shapes are more heavily linked to earth. In addition, colors such as light yellow, tan, and light brown are earthy hues that can be incorporated into a space to tap into this feng shui element.

A simple way to add an earth element into the home is to add things that come from the earth itself, like natural stones, bricks, and ceramics. Square-shaped terracotta planters and stone tabletops, for instance, can easily accomplish the task of adding an element of earth into a home. Painting walls in pale yellow and light brown and adding accessories such as throw pillows in these colors is another simple way to bring in the earth element into an overall design.

4. Metal

Metal is considered to be the purest element of feng shui and represents organization, focus, strength, and achievement. It’s meant to establish an environment that fosters successful ventures, capitalized opportunities, and keen insight. The energy that metal brings to an interior draws things together in a coordinated manner.

Associated with metal are the colors white and gray, along with  the round shape. These colors and shapes can be incorporated into a space by introducing oval-shaped area rugs, circular picture frames or mirrors, and round tabletops in shades of white and gray. Of course, you can always use paint on the walls to express the element of metal in any room of the home.

Blending this element with fire can help soften the typically harsh traits associated with metal and bring a sense of balance to a space.

5. Water

The element of water works in two different ways in feng shui: stillness and movement. Still water is associated with self-reflection and the inner self, while moving water is an expression of communication and community. The addition of water completes the elements of feng shui to create a well-balanced home.

Water is associated with the colors black and blue, as well as irregular and undulating patterns. Incorporating items in these dark colors and combining them with things that have a transparent or reflective surface can help create an aura of balance. This works even better with the addition of sporadic patterns and when combined with the fire element.

The Bottom Line

If simplicity and balance are what you’re aiming for with your interior design strategy, you may want to consider adopting a feng shui method of decorating. When used properly, the five elements associated with feng shui can make your home both sophisticated and comfortable to spend time in.

Feng shui is all about living in harmony with your surroundings, and using these specific elements can actually help reduce feelings of stress and disarray while evoking feelings of calm and stability. In a world that is inundated with stressful situations, it’s nice to come home to an environment that can evoke a sense of calm and stability.

Of all the owner-occupied homes in the US, about 53% are owned by the Baby Boomer generation. And while a large proportion of baby boomers are staying put in the homes they’ve lived in for decades, others are contemplating downsizing. Whether it’s because they’re empty nesters who don’t need as much space anymore or are looking for something that requires less maintenance, downsizing is an attractive option for many homeowners in this age bracket.

If you fall within this demographic and have considered downsizing, be sure to do some homework and ask yourself a few important questions first.

Is Now a Good Time to Sell?

Before you think about putting your current home on the market, determine if now is a good time to sell. Certain markets help sellers command higher sale prices than others, so you want to make sure that you’re getting your money’s worth by selling at a certain time.

Luckily, California has been favoring sellers for a long time now, and sale prices for homes continue to climb. Based on what markets in many centers across the Golden State are like today, odds are you’ll get a hefty price on the sale of your home.

That said, you still need to buy, and the market can seem tougher when you’re on the other side of the real estate coin based on current market conditions. As a buyer, you’ll have to determine if you can comfortably afford the prices of smaller homes and if it’s worth selling the property you’re living in right now in order to make a change.

What Are the Costs Associated With Downsizing?

One of the biggest reasons why baby boomers choose to downsize is to cut costs associated with maintaining and operating a larger home. It’s a commonly held perception that moving to a smaller home would help you save some money, but that doesn’t always happen. Aside from the possibility that the smaller home you purchase may be more expensive than you originally thought, there are other ways that downsizing might not exactly be cheaper.

Consider the costs associated with downsizing before you make your move, such as moving fees, condo fees (if applicable), and even buying new furniture to fit your new space. The new home you buy might also be located in a more expensive neighborhood, in which case you may also be looking at a higher property tax bracket. After crunching the numbers, assess whether a move would realistically help you save money if that’s one of the goals you’re trying to achieve with downsizing. 

Is There a Chance Your Space Requirements Could Change?

You might be an empty nester with no more need for all those extra bedrooms and bathrooms, but could your current situation change in the near future?

For instance, is there a possibility that your adult children could move back in with you as you age in order to take care of you? Do you have an older parent yourself who could use your care, in which case they would move in with you to make this scenario more feasible? Consider the possibility of a change in circumstances before you make the decision to downsize.

Is it the Size You Want to Change or the Layout?

Perhaps a change is warranted, but what kind of change? While you might think you want something smaller, maybe it’s just a different layout that would make life easier for you. For instance, perhaps the square footage you have right now is working for you, but all those stairs going from one level to the next are a total inconvenience. In this case, maybe the new home you look for shouldn’t necessarily be smaller but have a more functional layout for you in the form of a single story.

Before you buy your next home, carefully assess your needs and wants before automatically switching to something that’s on the smaller scale.

Will the New Location Offer All Amenities Required?

Think about the lifestyle you want to maintain when looking for a new home. Consider your daily routines and the amenities that you need close by in order to maintain your current lifestyle. Look at things such as public transportation, medical services, and shopping to determine how readily accessible they are relative to your new home’s location. Downsizing shouldn’t just mean swapping homes, but switching neighborhoods for the better.

The Bottom Line

If downsizing is on your mind, make sure not to jump into anything too quickly. Ask yourself if your home no longer fits your current lifestyle and needs, and only downsize for the right reasons. Discuss your options with a qualified real estate expert to get some professional guidance to make sure the decision you make is the right one. Having an agent on your team will also help make the transition to a smaller home as seamless as possible.

It can sometimes be a challenge to find a home on the market that checks off all the boxes on your list of must-haves. If that’s the case, there’s always the option to buy a piece of land and build your own home, customizing it from top to bottom to your heart’s desire.

But while buying vacant land is a potential alternative to buying resale, there are certain precautions you will need to take before you sign on the dotted line. Without in-depth research into the land you have your eye on, your enjoyment of your new home can be negatively affected.

Prior to purchasing land to build on, be sure to take the following factors into consideration first.

1. Location

The absolute most important factor to consider before buying land is its location. In the world of real estate, location trumps everything else and should always be the first thing to think about before buying. And not only should the municipality be considered, so should the precise lot location in relation to the overall community. For instance, a lot that’s situated at the end of a quiet culdesac and backs onto greenspace would be worth more than land in the same neighborhood that’s adjacent to a busy roadway.

Depending on your exact needs, you’ll want to assess the location of the lot and its proximity to amenities like public transit, highways, schools, parks, and so forth. You’ll also want to factor in the proximity of the land to your place of work in order to ensure the commute isn’t going to be much longer than you’d like it to be.

2. Property Setbacks

The setbacks of the land – which are the rules that stipulate how far the structure can be set back from the lot’s border – need to be considered before purchasing a plot of land. Where you’re allowed to build the house on the lot will be dictated by the property’s setbacks. And if you have a desire or need to build a home of a certain size, you’ll want to be sure that the lot can accommodate that size, and the setbacks play a big role in this.

3. Zoning Requirements

Jurisdictions may have land that’s zoned for residential or commercial use, or both. You’ll need to find out if the land that you buy is allowed to have a residential structure built on it, especially if the surrounding area is used primarily for commercial purposes. Besides, you probably wouldn’t want to build a home in an area where a bunch of industrial buildings will be erected.

Further, you will need to determine whether or not the area is zoned for additional structures – such as sheds or detached garages – if you have intentions of building them. In addition, there may be zoning restrictions that dictate the minimum size home that can be built on the lots in the area. If you don’t want or cannot afford to build or operate a large home, make sure the minimum structure size fits within your means.

4. Natural Hazards

Ideally, the parcel of land that you purchase will not be vulnerable to specific natural hazards. Depending on exactly where the land is located, it could be at risk for fires, which has been a huge problem in parts of California as of late. Determine whether or not the land is located within a fire zone before buying.

In addition, you’ll want to have the soil assessed on the land to check for its quality and composition, which will affect how your new home is built, the cost of the home’s foundation, and any landscaping you may want to do.

5. Easements

If there’s an easement on title of the property, you’ll want to know about it before you commit to buying. An easement gives another person or entity the legal right to use another person’s property for a specific purpose, regardless of who actually owns it. If, for instance, there’s an easement on your property that allows others to cross over it in order to gain access to another lot, it could have an impact on your level of privacy.

6. Utility Sources

Once your home is built, how will it be powered? Where will your water source come from? You’ll want to find out how your home will gain access to water, electricity, gas, waste, and even phone or cable. This is especially important in remote locations where the cost to hook up to municipal utilities can be extremely expensive. You’ll want to get in touch with the water and utility companies before putting in an offer on the land to find out what the costs would be to connect water, power, waste, and other connections.

The Bottom Line

There’s no better way to ensure the home you buy is fully customized to your liking than to build it yourself. But your first step is to buy some land to build on, and that doesn’t come without its own set of tasks. Do your research on the lot you plan to buy to make sure it’s exactly what you want without restrictions. Team up with a real estate professional who is well-versed in buying vacant land to help you find a lot that meets all your needs without compromising how you’ll be able to use and enjoy it.

California has been in the midst of a sizzling seller’s market right now with demand for housing and tight inventory driving up prices through the roof. If you’re planning to make a move, selling would likely be a great option.

But what about renting out your home and turning it into an income property? If the numbers line up, would it be worth it for you to hang on to your home and generate some income through rent, or should you just cut your ties and sell before moving on to something else?

Before you choose which route to take, you should ask yourself a few important questions to ensure you’re making a sound decision.

Do you have unrealistic expectations about hanging onto your home?

You might want to rent out your home instead of selling it as a means of making a passive income and trying your hand at real estate investing. But you may even just want to rent rather than sell so you can hang onto your beloved home that you’ve developed an emotional attachment to. If that’s the case, be sure that your decision to rent it out is based on sound research and number-crunching just to keep your home in your possession.

The need to hold onto a home by renting it out can turn out to be a bad decision for some homeowners. Tenants may not necessarily care for your home the way you would, so if you are particular about how your home is lived in, you may be sorely disappointed if renters are hard on your home and leave it in poor shape. If you are considering renting the home just to hang onto it, be sure that you’ve carefully considered the possibility that it might have to be repaired and improved between renters.

How much is the average rent in the neighborhood?

The idea of collecting a rent check every month to cover your mortgage might sound very attractive, but make sure you can command the amount of rent you need to cover your mortgage. Before you start looking for tenants, do some research into what the average rent is in the area for a property like yours. Don’t just look at what current listings are asking, but take a look at recently leased properties to see what they’ve been rented out for.

This is where a real estate agent comes in very handy – they’re not just for buying or selling. These professionals will be able to pull a report that lists similar properties in your area that have been recently rented out and the rent price they’ve been able to command. This will give you an approximate idea of what you can potentially rent your home out for.

Will the rent (and the costs of renting) cover the mortgage payments?

Once you’ve figured out how much rent you can realistically charge, your next step is to do some math to see if the rent covers all expenses related to operating the property. Unless you’ve got a sizeable bank account that doesn’t rely on paying for the mortgage and all other expenses, you’ll want to be sure to factor in all expenses and determine whether or not the rent you charge adequately covers all related costs.

Consider the following expenses that you’ll be responsible for paying:

Mortgage (including both principal and interest)

Property taxes

Homeowner’s insurance

HOA fees (if applicable)

Landlord insurance

Advertising fees

Maintenance and repairs

Property management fees (if you’re paying someone else to manage the property)

Is there a chance that you could move back?

You might have thought about renting instead of selling because there’s a chance that you could be moving back. Maybe you’ve been temporarily transferred to another office for work or simply want a change of scenery for a little while. Whatever your situation might be, there may be a possibility that you could be moving back to the area

If that’s the case, renting may be a viable option, as it could actually be cheaper and less complicated to rent rather than go through the sales process, then have to find a new home to purchase when you return.

Are you looking to take advantage of tax deductions?

Renting out a home can offer you some tax deductions that can help to offset the costs associated with carrying an investment property. In the majority of cases, you can claim deductions on any depreciation related to the home.

In the simplest of calculations, your annual depreciation would be the price paid for the home and whatever you spent on improving it (not including land value) divided by 27.5 years. So, if the home cost you $400,000, less $50,000 for land value, your annual depreciation would be about $12,727 ($350,000 ÷ 27.5 years). You can also deduct any repairs and property taxes related to the investment property. These deductions can go a long way in reducing your overall expenses.

Will housing prices continue to increase over the near future?

If you believe housing prices will continue to increase at a rapid pace over the next few years, it might make sense to hang onto the home in order to sell at a much higher price point and make an even bigger profit, if you can carry an additional mortgage.

However, if you wait too long to sell, you could be faced with capital gains taxes, which brings us to our next question.

Have you considered capital gains taxes if you sell?

If you sell a home that’s not your primary residence, you will be required to pay capital gains taxes. The property would be considered your primary residence if you live in it for two out of the five years before you sell it. But if you sell after renting for more than three years, that home won’t be considered your primary residence anymore, which means you’d be faced with a potentially hefty capital gains tax bill when you sell.

If you’re planning to rent out your home, make sure you understand how much you might possibly have to pay in capital gains taxes. You may even want to move back into your home in order to make sure the home qualifies as your primary residence before selling.

Can you buy another home without the proceeds of selling your current property?

The majority of repeat homebuyers tend to use the proceeds of the sale of their homes to be put towards a new home purchase. Considering how expensive a home purchase is, any amount of money that can be tapped into is a great help.

If you need the equity in your current home to be used as a down payment for a new home, then selling might be your best bet. On the other hand, if you can manage buying a new home without depending on the proceeds of your current property, then renting might be financially possible for you.

Are you prepared to become a landlord?

Even if the numbers make sense to rent, have you considered what being a landlord would be like? In a perfect world, you’d be able to find an awesome tenant right away who will pay rent on time every month and take great care of your property. But that’s not always the case.

You’ll need to be prepared to market the property for rent, schedule showings, take calls from your tenants, collect rent checks, maintain the property and make repairs, and deal with complaints. This can be aggravating and can take up a lot of your time. And if you don’t live very close to the home, that can make the job of a landlord even more difficult.

Of course, you can always hire a property management company to handle these tasks for you, but you’ll have to pay them. Just make sure this added expense doesn’t eat too much into your profits.

Are you educated on tenant and landlord rights?

You can get yourself into real trouble if you make a move that violates the landlord-tenant laws in your jurisdiction. These rules dictate how you conduct yourself as a landlord, including how much you can increase the rent and how you’re allowed to evict renters. Make sure you’ve familiarized yourself with these rules and regulations to avoid landing in legal hot water.

The Bottom Line

If it’s time to move, selling is always the more obvious choice. But if you have valid reasons for holding onto your home and have crunched the numbers, renting might be a financially viable alternative. Before you make your decision, be sure to consult with a real estate professional who has experience dealing with both sales and rentals in your area to find out which option is best suited for your situation.