Every home owner has been a first time home buyer at some point in their Real Estate journey. Along with the excitement of buying that first home often comes anxiety about a number of different things; will I be able to afford a home, on an ongoing basis? Am I biting off more than I can chew? And along with that question, the lender says I'm qualified for way more than I want to spend -- am I going to be pushed into going higher in the price I pay? Is buying a home really a good investment to make? Is now a good time to buy or should I wait? How much money do I have to have to buy a home? It will take me forever to save up for a 20% downpayment, how will I ever afford a home?
There are any number of questions, all valid, that first time homebuyers ask. We'd like to address some of the more common ones and hopefully ease your mind if you are a first time homebuyer or maybe someone who hasn't been in the home buying mode for a long time.
Will I be able to afford a home, on an ongoing basis?
As rents continue to go up, home ownership is a way that you can control living expense. When you buy a home, your principal and interest will remain the same for the life of the loan. The only thing that can change in your payment is your taxes and insurance. In our market those are pretty negligible changes and don't typically effect your total payment significantly. Rents will typically increase at each renewal of the lease and currently we have seen those increasing often by several hundred dollars.
Am I Biting off More than I can Chew and Will I be Pushed to Spend what the Lender Says I'm Qualified to Spend?
Whether renting or buying a home, it is important to consider how much your budget allows for that cost. While you may qualify for significantly more than what you're comfortable with, typically it's best to stay in your comfort zone or if you stretch it, to do it in a way that has some certainty about it. For instance, if you typically receive a raise at the end of a year, you may feel o.k. about stretching your mortgage payment by some portion of that raise, knowing that you'll be making more income each year and that a little higher payment will be more and more comfortable as time goes on. A standard rule for lenders is that your monthly housing payment (principal, interest, taxes and insurance) should not take up more than 28 percent of your income before taxes. This debt-to-income ratio is called the "housing ratio" or "front-end ratio." You will normally hear ranges of 25%-30%. However, the most important thing is that you are comfortable and can see yourself comfortable for the foreseeable future with the payment. Our practice at LaskeyHomes is to not push you beyond your comfort zone, but to allow you to make those decisions.
Is Buying a Home Really a Good Investment to Make?
Over time real estate ownership has proven to be probably the very best investment a person can make. There is a tangible asset, that is always going to be in demand. While real estate goes through up and down cycles, it's easy to look at the real estate market over time and see that a majority of time real estate has appreciated well.
How Much Money do I have to Have to Buy a Home?
There are many different types of loan programs that range from $0 down to 20% down. Depending on your income, credit scores, debt to income ratios and many other factors will determine how much money you have to have to buy a home. Some of the lower down payment programs in our area are: CHFA Loans, where a buyer is given assistance through grant money to purchase a home. FHA requires 3.5% down to buy a home, however that can be through gift money. USDA loans in the more outlying areas provide 100% financing. If you are active duty or a veteran you may qualify for a VA loan, requiring 0% down. Conventional loans start at 3% down. The best thing to do is to talk to a lender about your particular situation and see what fits you the best.
Worth noting is that when you buy a home you have down payment costs as well as closing costs. All closing costs can be paid by the seller of the home and we often negotiate that into the transaction.
Is Now a Good Time to Buy or Should I Wait?
No one can answer that question with 100% certainty; however, those that answered that question last year at this time and decided to wait have probably found that homes they are interested in have gone up 5% - 10% in our market. Rates are still low for mortgages. It's more competitive for the buyer right now because of lower inventory, but the right home can still be affordable and you can begin the process of owning an appreciating asset.
We would love to meet with you and answer any other questions you might have about buying. In fact, if you would like, contact us and we'll be happy to provide you a Home Buying Guide that takes you through the process of buying that first home.
Nervous about being a first time home buyer? You will always have a certain degree of anxiety in the home buying process; however, we have been through this process hundreds of times and can provide you the assurance throughout the process to calm the anxiety. Give us a call today!
What Kind of Home Can I get for my Desired Price?