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Home-buying 101: Tips for first-timers

As the owner of a large portfolio of residential investment properties – and head of her own realty firm –Karen Rittenhouse has guided her two sons on home-buying. She advised both to take the leap early, and they accepted her advice.

“If you’re capable of buying, there are big benefits, including tax write-offs for mortgage interest and, ideally, future appreciation,” says Rittenhouse, author of “The Essential Handbook for Buying a Home” and other real estate books.

Rittenhouse adds that it’s crucial for most young adults to wait until they have stable income – or substantial help from their parents – before taking on property ownership. She says most should postpone if they expect to be moving in a few years. Also, she notes that people carrying a large amount of student debt can find it tough to obtain mortgage approval.

Even given those provisos, what makes a house purchase so compelling a step for many young adults?

As Rittenhouse notes, rents are high and rising in many desirable areas, due in large measure to the fact that new apartment construction slowed substantially during the worst of the recession, resulting in a landlords’ market in many areas of the country.

“If you investigate the neighborhood where you want to live, you could find that it’s now as cheap to buy as to rent there,” she says.

Here are a few pointers for first-time homebuyers:

1. Look beyond family members for advice on whether to buy. Young adults often seek counsel from their parents when considering major life decisions. But Rittenhouse says that while most parents are well-meaning, few are knowledgeable about the current real estate market.

Fred Meyer, a veteran real estate broker who sells property near Harvard University, says that in addition to family members, young buyers are wise to look to professionals for advice.

He recommends that you start with a one-on-one session from a real estate agent who’s earned your trust. Also, find a reputable mortgage lender who will take the time to tutor you on the fundamentals of real estate finance and calculate how much you can afford to spend.

2. Buy for the future, to the extent possible.

Merrill Ottwein, a real estate broker and former president of the National Association of Exclusive Buyer Agents, says novice homebuyers are inclined to short-term thinking, and often fail to pay as much attention to their future plans as they should.

“Even if you don’t want kids, it’s a lousy idea to buy into a neighborhood with poor schools. You'll get a lot more appreciation if the home you own will one day be marketable to families with young children. There are always a lot more family buyers than individuals in most areas,” Ottwein says.

He also recommends that first-time buyers rule out any oddball home that differs greatly from others in the same location. For instance, remove from your list the only house on the street without a garage, or any place that dwarfs the others because of an oversized addition.

3. Don’t push the panic button about buying your first home. Just as the economy has its ups and downs, so do real estate markets. This volatility causes some first-time buyers to move toward their goal too cautiously, while others step on the accelerator out of fear that prices will rise out of their range.

Meyer recommends a methodical middle course between these two extremes.

How can you accurately determine if prices within areas that you’re looking at are realistic or over-inflated? Meyer says that information on the local rental market can tell you a lot about asking prices in your target neighborhood and help protect you against overpaying.

“First, find the house you’d like to buy in the area of your choice. Then find a few very similar houses in the same area that are available for rental. If the rent is as high or higher than your mortgage payment for the like property, you’re safe in buying,” he says.

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