About Buying Your First Home?
Many renters are starting to think about
purchasing a home of their own. Several factors should
be considered when purchasing a home:
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
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.
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 go online and
use a "home affordability" calculator. Good
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.
money for the transaction will be from.
Typically home buyers 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
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 or a town home, 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.