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Tips For Homebuyers

Have you ever purchased a used car from an ad that you saw online or in the newspaper? You might have called the owner to make an appointment to see the car. It was exactly what you were looking to find. At that point, you told the owner that you would go home and get the cash. Suddenly another buyer comes along, with his checkbook, and buys the car.

In the same way, if don’t have the money lined up, someone else will buy your dream home. Here are some tips to prepare you for the purchase of your new home.

GET YOUR FINANCES IN ORDER

Before you start looking for a home, determine your buying power. Contact your lender or a mortgage broker to get pre-approved for a loan. The pre-approval process will examine your monthly expenditures to determine a comfortable mortgage payment. Not all lenders are the same and you might want to shop around. A mortgage broker will let you know your qualifications. You will also learn how much you can comfortably offer for a home and your expected monthly payments.
A mortgage broker will not charge a fee to prepare a pre-approval letter.

If you need a suggestion for a mortgage broker, email us at cathy(at)cbislandhomes(dotted)com.

STAY ON BUDGET

If you plan to buy a home, do not purchase a new car, boat, expensive furnishings, etc. until after the sale is complete. Any of these purchases will add debt to your monthly expenditure and thus, reduce the buying power for the new home.

FIND A HOUSE THAT YOU CAN AFFORD

When buying a house, you can generally afford a home that is two times your annual salary. When the interest rates are low, you can afford more. If your salary is $200,000, you can afford a mortgage of $400,000. Many lenders use the 28/36 rule. Basically, you should not spend more than 28% of your gross income on a total house payment, including insurance and property taxes. The 36% rule suggests that you do not spend more than 36% of your monthly income on all of your debts combined, including alimony, child care payments, student loans, etc. Those figures can help to determine an affordable range for your new home.

SINGLE FAMILY HOME VERSUS A CONDO OR TOWN HOME

Some people love the amenities in a condo, while others prefer the freedom of a single family home. What about the difference in costs? There are additional maintenance costs to keep a single family home in good order. The property taxes will also be higher, since you own the land.

In contrast, in a condo or townhome, the property taxes will be lower, but the HOA fees will significantly lower your buying power. For example, if you can afford a single family home priced at $500,000, that is equivalent to a condo priced at $400,000 if it has a $500/month HOA fee. Furthermore, those fees usually rise over time, especially in older developments with aging structures and amenities that require ongoing maintenance.

Ready to get started? Call me at 808.800.1823 or email cathy(at)cbislandhomes(dotted)com.