Thinking about purchasing a home of your own? Keep these critical considerations in mind:
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 used to 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. In today's market (10/2007) many areas in the country have declining appreciation. This can be a big opportunity for new home purchasers. 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. The Pacific Northwest has seen unprecedented appreciation and growth over the last 5 years. Some neighborhoods appreciating 20% to 30% a year! Today we are seeing more of a stablizing effect on home prices, not a decline. Sellers however, are having to lower their expectations on price and buyers are able to take advantage of the current market by buying property at 2005 prices.
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 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, call us today. We are also mortgage brokers through America One Finance or from our home page click on Calculator to go to our "home affordability" calculator. Our calculator will give you a range of what you may qualify for. In the current market the mortage industry in going through some serious turmoil. It can be a little more difficult to quality for a loan if you do not have any down payment or your credit score is low. The only way to find out for sure is to call us for a Free Pre-Qualification. An easy way to pre-qualify yourself is to use the "28/36" rule, which 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, we may be able to 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. There are still some loan programs available with zero down payments. Typically they are goverment sponsored loans such as FHA and VA. In todays market the lenders are doing their best to bring new opportunities to brokers like ourselves so we can help you get financing for your purchase. The best thing is to call us when you are ready and serious to buy and we will give you the best and lowest interest rate and program options for the day.
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 us, as your realtor and or loan officer aware and your 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.
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