Thinking about purchasing a home of your own? It may be the perfect thing for you to do! Here are the things you need to know.
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 3% 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 prices are rising in the area you buy your home, 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 with a small yard 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 you add onto the house for some extra bedrooms? Could the attic space be turned into a master suite? Spend some time thinking about what you’ll need in the next few years. This will help you find a home that will satisfy you for years to come.
Your finances, credit and home affordability:
Is now the right time financially for you to buy a home? Is your credit good? You may need time to clean up any credit issues on your credit report. Generally, a couple of negatives 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 negatives on your report, lenders like may still provide you with a loan, but you may have to pay a higher interest rate and/or fees.
Comfort zone: should you borrow as much as you qualify for because with regular pay raises and increased earning potential, the big payment today will seem like less of a payment tomorrow? Or should you stay under budget to be safe? 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 you stay within your comfort zone.
How to determine how much home you can afford:
Talk to a lender or two. Find someone who you are comfortable with and does not talk over your head. A good lender should be willing to teach you the proper steps to get a loan that is right for you. Their is a general rule of thumb you can use which is: 28/36 this 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 particular situation you could exceed these ratios but there should be a good reason why you are.
This is usually 10-20 percent of the cost of the home for a down payment and closing costs. If you are first time buyer or buy a property that has incentives for primary home owners you may be able to pay less. Also, certain types of jobs qualify for special financing – school teachers, firefighters, police officers. Be sure to ask your lender if they have any such programs.
The ongoing costs of home ownership:
Maintenance, improvements, property taxes and insurance are all costs that are added to a monthly house payment. If you buy a property where there is a monthly homeowner’s association fee that is a factor as well. When looking at homes in different communities be sure to look at all the costs not just the sales price. Your Realtor should be able to help you estimate the monthly costs for your area that are not mortgage related.
Owning your own place can be very rewarding both emotionally and financially. Taking the correct first steps as outlined above will help you make the most of it.
See all homes for sale in the Palm Springs California area at www.PSagent.com