Are your finances in order?

In order to qualify for a mortgage loan to buy a home, you’ll need good credit, a pattern of paying your bills on time and saving money, and a low debt-to-income ratio (your gross monthly income compared to the minimum payments on all recurring debts). Keep in mind some lenders will have stricter guidelines than others, but the lower your debt-to-income ratio, the better your chances of a loan approval. Saving money and preserving or improving your credit history are essential elements to homeownership.

Have you saved enough money for your down payment?

Your down payment on your first home will most likely be the single largest investment you’ve ever made. In addition to the down payment you’ll need to finance the home, but also all the unforeseen costs that are associated with homeownership. Keep in mind there will be closing costs, insurance, taxes, and money for repairs and furnishings to turn the house to a livable home. 

Can you afford the payments?

In addition to your principal and interest payments, you will need to consider additional costs that go into homeownership. 

• Property taxes
• Insurance
• HOA (homeowner’s association) fees
• City assessments
• Water, sewer and/or garbage
• Other utilities like electricity, gas, phone, internet

Deciding whether to rent or buy always comes down to what you can afford.

Advantages of Buying a Home

• Every payment brings you closer to owning the house. When you pay your rent, that money is spent. Gone. Bye. Not returning. But when you pay your mortgage, you work toward full ownership.
• You can cash in on appreciation. Your home will most likely increase in value over time depending on the market and how well you take care of your home. What you buy today could sell for much more down the road.
• You have tax advantages. Many of the costs of owning a home—like property taxes—are tax deductible. And if you’re paying off a mortgage, you’ll get to count your mortgage interest as a deduction when you file your tax return.
• You have the freedom to renovate your house. As the owner of your house, you can do whatever you’d like to it. 
• It’s yours! You have a house! You have the satisfaction of knowing you made the American Dream your reality.

When should you rent?

1. You’re paying off debt.

If you have student loans or credit card debt to stomp out, consider your apartment your stomping ground. Unless your rent is devouring too much of your paycheck—in which case you should probably find a cheaper apartment—renting can offer you the opportunity to get out of debt and save.

2. Your job requires you to move around.

If you’re in the military or if you don’t plan to stay long in an area, then you should rent. In most areas, you’ll need to stay in a house for two to three years to make buying worth the investment.

Disadvantages of Renting

• Rent rates will go up. Even if you found a killer deal in a hot area, inflation, competition and rising property values will cause your rent to go up year after year.
• You have no financial incentives. No tax deductions. No equity. No rising property value. You’ll never see the money you pay again.
• You have less freedom to renovate. Even though you think hardwood floors would look great in the bathroom, your landlord may not approve of your renovation idea, especially since they’ll be the one to pay. You have little say in what your place looks like.

For most mortgages, lenders calculate your principal and interest payment using a standard mathematical formula and the terms and requirements for your loan.

A typical fixed-rate mortgage is calculated so that if you keep the loan for the full loan term – for example, 30 years – and make all of your payments, you will precisely pay off the loan at the end of the loan term. The payment depends on the loan amount, the loan term, and the interest rate. You can use an online mortgage calculator to calculate the monthly principal and interest payment for different scenarios.

Choose a few must-haves that represent the most important aspects of that lifestyle, such as commute time. Be prepared to stay flexible and accept trade-offs, but don’t compromise on your core criteria. Below are a few items to consider so you can quickly move on to the next listing and not have any regrets.

Location and Neighborhood

No matter what type of home you buy – condo, single-family home, or townhome – you can’t change its location. That’s why you need to be happy with the location and neighborhood first and foremost. Even if the home itself is perfect, you will never truly love it if you’re in the wrong location for your needs and lifestyle.

Things to consider: convenience to work or school; public transportation options; grocery shopping and restaurant proximity; noise and traffic level day and night; green space or yard; walkability; and the charm, safety and tidiness of the neighborhood. What’s important to you?

Size and Floor Plan

Decide how many bedrooms and bathrooms you truly need (not just want). Is the kitchen and eating area workable for making and enjoying meals? What about space for a big screen TV if that’s on your must-have list? How about an easy indoor-outdoor flow, especially if you like to entertain on a patio or have kids who want to play in the yard.

Reasonable renovation needs

Ugly carpeting and wild paint colors attract a lot of attention, but those can be easy, and relatively inexpensive fixes. And a house that’s perfect except that it needs a total kitchen remodel might not be as perfect as it seems. Before making an offer on a fixer-upper house, make sure the price, plus any obvious renovations on your checklist will fit your budget.

Let us know how we can help you get started on house hunting or answer any of your questions. We are here to help.

A home warranty is a contract between a homeowner and a home warranty company that provides for discounted repair and replacement service on a home’s major components, such as the furnace, air conditioning, plumbing, and electrical systems. A home warranty may also cover major appliances and swimming pools depending on your plan.

Home warranty companies have agreements with approved service providers. When something that is covered by a home warranty breaks down, the homeowner calls the home warranty company, which sends one of its service providers to examine the problem. If the provider determines that the needed repair or replacement is covered by the warranty, they complete the work. The homeowner only pays a service fee ranging from $75-$125 every time the warranty holder requests that a service provider come out to the house to examine a problem. If the problem requires more than one type of contractor to visit (e.g., a plumber and an electrician), the homeowner may have to pay the service fee for each contractor.

Having a home warranty doesn’t mean the homeowner will never have to spend a penny on home repairs. Some problems won’t be covered by the warranty, whether because the homeowner didn’t purchase coverage for that item or because the warranty company doesn’t offer coverage for that item. Also, home warranties usually don’t cover components that haven’t been properly maintained. Furthermore, if the warranty company denies a claim, the homeowner will still have to pay the service fee and will also be responsible for repair costs. Be sure to read the fine print in the home warranty contract so there are no surprises.