My New Blog

Do I have enough money to buy a home?

To first step to finding out how much home you can truly afford is to get pre-qualified for a mortgage.

Also, take a step back and look at your finances. Ideally, you should have around 20 percent of the purchase price to put down.  Then add up all of your monthly obligations including student loans, child support payments, alimony, car payments, credit cards, etc.   Your total expenses should ideally be around 36% of your income.   

Once you've looked at your savings, make sure that apart from your down payment, you'll have enough left over to pay closing costs which incluse loan costs, escrow, title, inspections. The National Association of Realtors (NAR) reports that this amount averages between 2 and 7 percent of the home price. You also need to have money left as a cushion. What if unexpected repairs, either to your house or car, come up? What if you or a family member needs medical attention? Be sure that you have enough money leftover after the purchase to keep your life running smoothly.

Will I have buyer's remorse?

There is no such thing as the perfect house.  You may have to give up a few "wants" to get a few "needs" when you buy your next home. Or if this is your first purchase, you may have to buy something a little short of your dream house, and build equity in order to move up at a later date. Try not to lose sight of the big picture. This is a home that you own. You now get the benefits of tax breaks. You are building equity as you pay off the loan. And, hopefully, your home will appreciate in value over the coming years.

How can an unhandy owner handle repairs?

Before you swear off doing some of your own projects or repairs, know that everyone starts somewhere. Take a class at your local home improvement store, invest is a handyman's guide, or ask a friend that has already tiled their bathroom or fixed a leaky sink to come and give you some pointers.

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 I need to move?

Experts recommends that to build equity, you need to have owned your home for at least 3 to 5 years.  Look at your annual mortgage statement or call your lender to find out.  Usually, you don't build up much equity in the first few years of your mortgage, as monthly payments are mostly interest, but if you've owned your home for five or more years, you may have significant, unrealized gains.  If the time is less than five years, then you should be prepared to not make money on the sale of your home, as the market has dropped.  And you may have to pay closing costs and commission. 

by Carla L. Davis   Copyright © 2010 Realty Times. All Rights Reserved.

When purchasing a home, it is important to keep in mind some basic concepts that could help make the purchase a smooth one with a favorable outcome. 

Build a Team:  Buying a house is a complex transaction. It should be a team effort.  You'll need a Realtor, lender, home inspector, insurer, title company perhaps a lawyer to help you through each step of the way.  Your Realtor can help provide some team members.  But, choose an experienced agent with who has a reputable list of persons for you to draw on. 

Know Your Needs:  Your home should fit your real needs, budget and lifestyle.  Be sure the home is in a community and neighborhood you desire. Visit neighborhoods several times before you buy to check out schools, noise and traffic patterns.  Assess everything carefully.  Don't get carried away with something that is beyond your budget or style of living.

Get Pre-Approved:  Being pre-approved or pre-qualified gives you a general idea of how much you can afford to borrow.  It's better to be pre-approved for a given loan amount.  Having a letter is essential to making an offer.  Sellers will take you seriously. You'll stay on budget.

Overbuying  Buyers who purchased more than they could truly afford led, in part, to the collapse of the housing market. Analyze all your monthly costs including debts, food, transportation, entertainment, and savings. Your total monthly debts, including your mortgage, should not exceed 36 percent of your income before taxes. Don't forget to budget closing costs (often two to five percent of the home's purchase price), plus moving, redecorating and maintenance. Look ahead and allow for increases in ongoing expenses such as utilities and taxes.

Make Your Own Assessments:  You are engaged in what's likely your most valuable acquisition ever. It's a business transaction. Ask family, friends, co-workers, professionals and others you trust for referrals, but don't take their word for it.  Analyze and evaluate your team members.  Use those you determine to be experienced and knowledgeable. 

Get It In Writing:  The rate lock, the home inspection, disclosures, the contract should be in writing.  Always.  Should a dispute arise, you've got the details documented.

Understand the Document:  Understand what's really in any document before picking up a pen. Get documents in advance, take time to read them and ask questions. Get copies of your mortgage and closing papers a few days ahead of closing.  Ask questions before you sign.

Consider Resale Value:   Avoid buying a home that costs 50 percent more than neighboring homes. Reconsider buying the most expensive home on the block. Neighbors' lower home values will weaken yours.  You will want a home that appreciates with the market, not one that is already too high.  If the market fail means when it's time to sell, your price may not cover your costs. 

Contingencies in Contracts:   Make sure you have items built into your contract that will protect you so you will not lose your deposit money. 

• Loan Approval:  You may be preapproved but is the house, but loan approval involves not just your qualiying, but it a formal appraisal confirms that there is sufficient value in the home to warrant the loan. If the house appraises lower than the sales price, the loan may be declined.
• Inspection:  Never buy an existing or new home without a thorough home inspection. Walk through the home with the inspector to learn more about the house and any concerns he or she may have.
• Read all disclosures:  If something in a disclosure makes you uncomfortable, do further investigation or consult a professional.  Don't sign off on the disclosures until you are completely comfortable.
• Insurance:  Confirm you can get adequate insurance coverage. In some areas, or following certain disasters, it can be difficult to get types of hazard insurance.