 Many
renters are starting to think about purchasing a home of their own.
Several factors should be considered when purchasing a home:
How long you plan to live in
the home.
If you purchase a home and get a job
transfer or decide to move after only a short time, you may end up
paying money in order to sell it. The value of your home may not
have appreciated enough to cover the costs that you paid to buy the
home and the costs that it would take you to sell your
home.
The length of time that it will take to cover those
costs depends on various economic factors in the area of the home.
Most parts of the country have an average of 5% appreciation per
year. In this case, you should plan to stay in your home at least
3-4 years to cover buying and selling costs. If the area you buy
your home in experiences an economic up turn, the length of the time
to cover these costs could be shortened, and the opposite is also
true.
How long the home will
meet your needs.
What
features do you require in a home to satisfy your lifestyle now?
Five years from now? Depending on how long you plan to stay in your
home, you'll need to ensure that the home has the amenities that
you'll need. For example, a two-bedroom dwelling may be perfect for
a young couple with no children. However, if they start a family,
they could quickly outgrow the space. Therefore, they should
consider a home with room to grow. Could the basement be turned into
a den and extra bedrooms? Could the attic be turned into a master
suite? Having an idea of what you'll need will help you find a home
that will satisfy you for years to come.
Your financial health - your credit and home
affordability.
Is now the right time financially for
you to buy a home? Would you rate your financial picture as healthy?
Is your credit good? While you can always find a lender to lend you
money, solid lenders are more skeptical if your credit history is
not good. Generally, a couple of blemishes on a credit report will
make you a good credit risk and could qualify you for the lowest
interest rates. If you have more than a couple of blemishes on your
report, lenders like Quicken Loans may still provide you with a
loan, but you may just have to pay a higher interest rate and
fees.
Some say that you should refrain from borrowing as much
as you qualify for because it is wiser not to stretch your financial
boundaries. The other school of thought says you should stretch to
buy as much home as you can afford, because with regular pay raises
and increased earning potential, the big payment today will seem
like less of a payment tomorrow. This is a decision only you can
make. Are you in a position where you expect to make more money
soon? Would you rather be conservative and fairly certain that you
can make your payment without stretching financially? Make sure that
whatever you do, it's within your comfort zone.
To determine how much home you can afford, talk
to a lender or use our within loan and price calculator.
These calculators will give you a range of
what you may qualify for. Then call a lender. While some may say
that the "28/36" rule applies, in today's home mortgage market,
lenders are making loans customized to a particular person's
situation. The "28/36" rule means that your monthly housing costs
can't exceed 28 percent of your income and your total debt load
can't exceed 36 percent of your total monthly income. Depending on
your assets, credit history, job potential and other factors,
lenders can push the ratios up to 40-60% or higher. While we're not
advocating you purchase a home utilizing the higher ratios, its
important for you to know your options.
Where the money for the transaction will come
from.
Typically homebuyers will need some money for a
down payment and closing costs. However, with today's broad range of
loan options, having a lot of money saved for a down payment is not
always necessary - if you can prove that you are a good financial
risk to a lender. If your credit isn't stellar but you have managed
to save 10-20% for a down payment, you will still appear to be a
very good financial risk to a lender.
The ongoing costs of home
ownership.
Maintenance, improvements, taxes and
insurance are all costs that are added to a monthly house payment.
If you buy a condominium, townhouse or in certain communities, a
monthly homeowner's association fee might be required. If these
additional costs are a concern, you can make choices to lower or
avoid these fees. Be sure to make your Realtor and your lender aware
of your desire to limit these costs.
If you are still unsure
if you should buy a home after making these considerations, you may
want to consult with an accountant or financial planner to help you
assess how a home purchase fits into your overall financial goals.
However, if you want to get the process started, Click here to
begin
We hope that you find the above tips of some
use!
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