Are you thinking about a first-time home purchase? Although housing prices have decreased in many markets and the government is offering first-time home buyers a credit, the ability to gain a mortgage loan often is restricted. But, what if you do have a down payment and you qualify for a loan? What then?

If you plan to purchase property as a primary residence or for an investment (or both) and you're a first-time home buyer, what are your risks? Your gain – at least this year – is the first-time home buyers' credit from the IRS. That credit, which amounts to $8,000, is a carrot that few can ignore if you've never owned a home. While the IRS offers a few to answer questions about this credit, I will offer a few suggestions based upon my experiences as a first-time home buyer. Hopefully, the following insights may help you with your home-owning decisions...

• I purchased my home both as an investment and as a primary residence. The “primary residence” part means that this home is a dwelling where I actually live and that is considered as the legal residence for income tax purposes. A person can only have one primary residence at a time, but – depending upon local laws and regulations – that home may be shared with another family or other residents. The “investment” part is a hope – meaning, I hope the housing market will become more lucrative over the next five years or so.
  
  
• When you purchase a home, you will need to pay for an inspection – usually after you pay an “option fee” to move the house off the market and to put it “under contract.” Usually, the money for the inspection is paid when the inspection is complete, and the average price for an inspection is $300.00 +. If the inspector finds problems, you have options: First, you can back out and forfeit the option fee, or; you can negotiate with the owner to see what the owner is willing to remedy, or; you can accept the house “as-is” and fix the problems yourself.
  
  
• Read the fine print before you pay the option fee – especially before you put down an option fee. Sometimes, a poor report from the inspector will allow you to back out of the contract altogether, especially if the owner is not willing to remedy the problems. From my experience, you can expect problems, no matter how fine the house looks. I learned much from this document about the inspection process, and the information on that Web site saved time, effort and money in my case.
  
  
• If you ask the inspector to test for radon, this is an additional fee and testing – if done correctly – may take one to two days to complete and may require the cooperation of the owner if he still lives in the house. If the house does not have a basement, you may not need to test for radon.
  
  
• When you purchase a home, ask if you're purchasing total rights or surface rights. Most states govern the transfer of mineral rights from one owner to another and they also maintain laws that govern mining and drilling activities. These laws vary from state to state, and if you cannot find those state laws or do not understand them, it is best to get advice from an attorney before you purchase property. The reason behind this? One day you may discover that you're sitting on valuable resources, but that you do not own them. Learn more about these rights and find links to various state information as well at Geology.com.
  
  
• Get a plat of your property from the local town or county hall before you purchase anything. Plats are public property, and the only cost may be the price to have someone else find it for you or the copying fee if you find it yourself. If you don't live near the area, call the county or town to ask about their policies. This is not an expensive venture, and it's well worth your effort to learn more about your intended purchase.
  
  
• This plat should provide the exact measurement of the property, how it lies in relation to direction (north/south/east/west), the layout of any buildings on that property or in the area, and the easements that are placed on that property. Easements are a concern, as property owners may be expected to maintain those easements; however, those easements also allow various entities to gain access and use them. In other words, you own the property located in an easement, but not really.
  
  
• With that said, location, location, location is everything. If you purchase 80 acres with a house located at the rear of that property and maintain a ten-foot easement near the front of the property, then it may not bother you much if the county or state decides to expand the width of a road into your easement and create a new easement into your property from that new road's boundaries. But, if your house sits only fifty feet away from a road and you maintain a ten-foot easement along that road, then think about how you'd feel if that road was expanded into your easement.
  
  
• While you're at the town or county hall, visit the planning and zoning office for that town and for the county. Learn more about how the area is zoned near the planned purchase and how the town or county plans to control the zones if the town or county is growing (or shrinking). These lessons could help you make a good guess about what your property might be worth in the long term. But, your guess is just that – a guess.

In the next article I'll expand on some things you might check before you invest in a property. Buying a primary residence as a living space and as an investment takes guts – and a lot of knowledge. So, don't let that $8,000 lure you into a quick decision. You have, after all, at least six more months to close that deal this year.

Until Later,

Linda Goin