Do you have the money to buy a home?
Well, this question comes to mind for anyone who is considering the purchase of a home. It is a valid question because you need to know how much money you can truly afford even if you get pre-qualified for a home mortgage.
“Potential home buyers need to step back and examine their finances. Ideally, they should have around 20 percent of the purchase price to put down. They should also have less than 36 percent debt to income ratio. They should include all of their monthly obligations in this equation including such things as student loans, child support payments, alimony, car payments, credit cards, etc.,” said TJ Noye, branch manager of Precision Funding.
Once you have looked at your savings, potential buyers should make sure they have enough money for closing costs, which can include things such as attorney fees and possible transfer fees. The National Association of Realtors (NAR) reports that this amount averages between 2 and 7 percent of the home price.
A cushion of money is always good. What if unexpected repairs, either to your house or car, come up? What if you or a family member needs medical attention? Be sure you have enough money leftover after the purchase to keep your life running smoothly.
What if I feel like I have made a mistake buying this home?
Buyer’s remorse is common for those larger purchases. A home is the biggest purchase a person can make in his/her lifetime. First, there is no such thing as the perfect house. Prepare yourself for the feelings of “what if?” The reality is that you may have to give up some of your “wants” when it comes to that ideal home. Affordability is a reality that we all must face when it comes to major purchases.
If this is your first home purchase, you may have to buy something a little short of your dream house, and build the equity in order to move up at a later date. The goal is not lose sight of the bigger picture. This is that you own a home that has value. You get the benefits of tax breaks and building equity as you pay off the loan.
What about the repairs associated to the new home?
Many new home owners don’t like the idea of repairs but remember that everyone starts somewhere. There are many home improvement shows on television that can guide home owners through those small repairs associated with homes.
Be prepared for repairs, maintenance, and updates. Even with a new home, there will be projects. Plan accordingly financially. And if all else fails, hire a professional.
What if you decide you want to move?
Build Build Build Equity. You need to at least have owned your home for 3 to 5 years before you considering a move. The NAR recommends, “Look at your annual mortgage statement or call your lender to find out. Usually, you do not build up much equity in the first few years of your mortgage, as monthly payments are mostly interest, but if you have owned your home for five or more years, you may have significant, unrealized gains.” If the time is less than five years, be prepared to not make money on the sale of your home and even lose on the closing costs.
For more information about homes in Baltimore or to sign up for our VIP list, please contact Pillar Property Group. If you wish to discuss financing options for a home, contact Precision Funding.