All Forum Posts by: William York

                                                                               Costs Associated With Buying Your First Home

As a purchaser in a real estate transaction there are two costs you are responsible for, your downpayment and your closing costs. While these costs differ greatly based on your property and financing options below is listed some of the figures you should be prepared for.

While depending on your title company and lender for exact closing costs to provide a rough estimate going into any transaction assume 3% of the purchase price will be needed. We will touch on this later but if this was an unexpected expense you were not prepared for a seller credit is a strategy you can utilize to help mitigate these costs.

Loan related costs are calculated into your closings costs and while these vary based on your lending partner there are several key factors that are added up to produce this number. Your loan orientation fee, this includes fees for processing the loan application and can vary based on the lender. Your appraisal fee, the cost for a professional appraisal of the property's value. Some lenders also charge for underwriting and credit report fees.

Next are your title fees. Your title search ensures there are no issues with the property's title and protects against any potential title disputes. You can also opt into title insurance, this protects you in the future against issues that can include mechanic leans, encroachments etc. Title will also charge you for recording fees.

There are also some pre paid expenses you may pay at closing. These can include home owners insurance, property taxes, HOA fees etc.

You will be provided documents prior to closing with all of these fees listed out so you are fully prepared to pay them at the closing table. One strategy I highly recommend for all buyers is utilizing a seller credit. Depending on your home purchase and financing options you can opt into a seller credit to be applied to your closing costs. Why might a seller accept this you may ask? Instead of offering 100% of list price you can offer 103% of list price with a 3% credit. This allows the seller to net the same amount but you get your closing costs covered to allow you to keep more cash in hand. This will increase your loan balance and increase your monthly payment slightly but you can work with your lender to see the benefits of this strategy and if it is right for you.

You also do not need to offer more than list price, depending on your market and how competitive the property is you may get a seller credit and offer at or below list price. Please see a previous article by BPG on seller credits for more information regarding this topic.

The second expense to a buyer is the downpayment and the one most people focus on. Many think you need 20% down to buy a home and this could not be further from the truth for a first time homebuyer.

First time homebuyers can take advantage of FHA loans, these are backed by the Federal Housing Administration, these loans may require as little as 3.5% down payment! VA loans are another fantastic option for our military personal and may require no down payment at all. Another option are Conventional loans with a downpayment sometimes as low as 3%. With a lower downpayment you do have a smaller equity stake in your home off the bat but it allows you to get into homeownership sooner and start growing equity. One buzz word to be aware of with a lower downpayment is Private Mortgage Insurance (PMI), if your down payment is less than 20%, lenders typically require PMI. This insurance protects the lender in case of default but adds an extra cost to your monthly mortgage payment. Work with your lender to see if you would rather keep 16.5%-17% more cash in hand or lower your monthly payment avoiding PMI.

There are also a lot of grants and first time home buyer programs which can help on closing costs as well as downpayment. Ask your lender what you may qualify for! Utilize your lenders skills as they can help you set up financial strategies on how to put money away for these costs, help increase your credit scores and financially plan for your home purchase.

While buying a home as a first time buyer sounds scary and requires a lot of money there are many strategies to take advantage of that offer you low money down options. Connect with your lender and a realtor six+ months before you want to start getting active in the market so you have time to plan for one of the most exciting purchases of your life. Good luck and reach out to the team at BPG Residential for any real estate questions you have.

The Duplex Advantage: Real Estate in Washington, D.C.

Investing in real estate can be a smart and rewarding financial decision, especially in a city like Washington, D.C. Among the various real estate asset class options available, duplexes stand out as a unique and advantageous investment opportunity. Let’s dive into the benefits of investing in a duplex in DC and explore why it could be the right move for you.

The Dual Income Stream

One of the primary attractions of investing in a duplex is the dual income potential. A duplex consists of two separate units within a single building, allowing you to rent out both units to different tenants. This arrangement generates two streams of rental income, which can significantly bolster your cash flow.

Maximizing Rental Income

Washington, D.C. is a city with a high demand for housing due to its thriving job market. This demand translates into competitive rental markets, and owning a duplex can give you an advantage in capitalizing on this demand. While vacancy can kill a landlords annual returns having two separate units helps reduce the risk of total loss of income during a turnover.

Live-In Investment Strategy

A unique aspect of duplex ownership is the ability to live in one of the units while renting out the other, It provides you with the opportunity to offset your living expenses through rental income. You are able to finance this investment as a primary residence as well meaning you can bring much less capital to the closing table.

Building Equity and Wealth

Investing in a duplex also presents the opportunity to build equity and wealth over time. As you pay down the mortgage through rental income, your equity in the property grows. Additionally, if property values in D.C. appreciate, your investment could yield substantial long-term financial gains.

Tax Benefits

Real estate investments often come with tax advantages, and owning a duplex is no exception. Deductible expenses such as mortgage interest, property taxes, insurance, and maintenance costs can potentially reduce your taxable income, offering you more financial flexibility.

Economies of Scale

Managing two units within the same property can lead to economies of scale. Maintenance and repair costs can be streamlined by handling issues in both units simultaneously, potentially saving you money and time in the long run.

Partnering with the right Realtor

When considering a duplex investment in D.C., it's wise to partner with experienced professionals. An agent who specializes in investment properties can help you find suitable options, analyze potential returns, and negotiate favorable terms.

In conclusion, investing in a duplex in Washington, D.C. can offer a range of financial benefits, including dual income streams, the potential for wealth accumulation, tax advantages, and the opportunity to live-in and manage your investment. With the city's strong rental demand and potential for property appreciation, a well-researched and strategically located duplex could be your ticket to a successful and profitable real estate venture. As always, thorough research, careful analysis, and professional guidance are essential to making the most of this investment opportunity.