Renting is…. fine. But there are some drawbacks. First, when you’re
signing checks over to a landlord every month, it can feel like you’re throwing
money away. Second, if you own your own house, you can paint the walls, switch
up the floors and have as many pets as you want without fearing for your
security deposit fate.
According to the National Association of Realtors, you’re not alone if
you’re lukewarm about renting – they predict 2015 is going to be “the year of the first-time home buyer.”
Don’t run out
and call up a realtor just yet! Jumping the gun on buying a home is a recipe
for regret and disaster.
Ask yourself
the following six questions to determine if you’re really ready to pull the
trigger, or if 2016 may be a better bet:
1. How Healthy Are Your Savings?
In order to
qualify for a conventional mortgage, you’re expected to put down at least 5% of
your down payment up front, plus a few thousand in closing costs (roughly 2-3%
of the purchase price) and escrow fees which have to be paid in cold hard cash,
and have money in the bank, so you’re not house poor once the deal is done.
If you don’t
have the money for a down payment squared away, we recommend focusing on
building up that savings account in 2015.
2. How Much Money Can You Afford To Part With Each Month?
If you’re comfortable financially, that doesn’t necessarily mean you can
go out and buy a house at any price. Before going Zillow-crazy, get a realistic
understanding of what you can spend overall and what that will look like
monthly. For a quick breakdown of how much you can expect to spend, you can use
this straightforward CNN Mortgage Calculator.
Okay, so now you have your mortgage number. That’s just the start.
Unlike the Rent-Life, the Owner-Life includes paying for anything that goes
wrong and all ongoing maintenance. To determine how much you should save
annually in a house fund, calculate
1–3 percent of what you think your house’s initial price will be. This is the
average cost of maintenance every year. So, owners of a $200,000 house should
plan to budget $2,000 to $6,000 a year on ongoing upkeep and repairs.
Add the above
numbers together. Can you realistically make those payments? Or are you getting
over your head? If you’re already freaking out, just head back into the Renter
Waters for a spell.
3. Are You Planning On Sticking Around?
If you’ve
lived in one city your entire life, your family is there, you love your job and
you have no plans of leaving, buying may be a great idea. But if you’re unsure
about your city for the long-term, you shouldn’t buy just because a calculator
says you’ll pay less than renting.
Experts
recommend staying in a home for a minimum of five to seven years to actually
get any value out of your real estate because the transaction costs of buying a
home are so high. If you skip town in a year or two, there’s a chance you won’t
break even on your mortgage and will owe more than your house is worth. Not
cool.
4. Are You Preapproved?
Do you have
enough cash to pay for a house? Most people don’t. Realtors know this, and most
of them may set up a search for you, but they won’t spend a lot of time on
wanna-be buyers who aren’t preapproved. If you don’t get preapproved for a
mortgage, you’d be wasting both the realtor’s and your own time. Before you get
too far into the process, set up a meeting with a mortgage professional to make
sure you’re good to go.
5. What Is Your Credit Score?
Some numbers,
like your weight, your GPA and your credit score just feel private.
Unfortunately, when it comes to getting a home loan, you’re going to have to
spill the digits. Here’s why it matters: Before you can be approved for a loan,
lenders take a look at your credit score to determine if you’re a safe or risky
investment.
The maximum
credit score you can have is 850, but only 10% of people applying for a
mortgage have a score over 800. Basically, any score over 700 is seen as safe.
Anything below is considered dicey, and mortgage lenders begin to say “No” when
they see a score below 640. If you get into the 500 area, you’re basically only
eligible for subprime loans, which come with a lot of hidden fees.
There is good news: Credit scores can be fixed! The first step is
finding out what your number is right now. (Check out LearnVest for the skinny on how to
get that rolling. It's free!) If it’s lower than you expected, you should consider
having a conversation with a financial counselor to get back on track.
In the
meantime, pay your bills on time and make sure your credit-debt ratio is less
than 30% (meaning that you aren’t carrying a balance on a credit card larger
than 30% of the total credit limit). And if you’re holding onto any small
balances on multiple credit cards, pay them off. It’s better to hold a balance
on one card, even if it’s a larger balance, than hold onto multiple small
balances.
6. Is Your City A Good Spot To Buy In?
When experts talk about a hot market, that doesn’t necessarily mean your
neighborhood is a hot market. In many cities, the market varies from
neighborhood to neighborhood. Before you dive head first into homeownership, do
your homework. Make sure you’re making a sound financial decision by buying not
only in your city, but in the neighborhood of your choice. If you’re still
tempted to buy in a “hipster” area and cross your fingers it pays out, read one woman’s tale of buying in an
up-and-coming neighborhood.
Information
provided by BrightNest.com.
Check your current home value and neighborhood activity any time you want!
When
you are buying or selling property in today's market, it's important to have
confidence in your Real Estate professional. Valerie’s commitment as your
REALTOR® is to provide you with the specialized Real Estate service you
deserve.
When
you are an informed buyer or seller, you'll make the best decisions for the
most important purchase or sale in your lifetime. That's why Valerie’s goal is
to keep you informed on trends in Miami Real Estate. With property values
continuing to rise, Real Estate is a sound investment for now and for the
future.
As
a local Miami area expert with knowledge of the communities, Valerie’s
objective is to work diligently to assist you in meeting your real estate
goals.
If
you are considering buying or selling a home or would just like to have
additional information about Real Estate in your area, please don't hesitate to
call me at 305-785-3389, visit my website, or e-mail me at valerie@valeriebenadi.com
