This week we are continuing our top 10 list of home buyer’s most frequently asked questions!
6. Why should I buy a home instead of rent one?
A home is a long-term investment that gives you secure long-term housing and financial security. When you pay rent, that money goes to pay your landlord’s mortgage and related expenses. When you make a mortgage payment on your own home, however, you are putting money toward your financial future. You can deduct the cost of mortgage loan interest, as well as property taxes, from your federal income taxes and, in some states, from your state taxes. You’ll also have something that’s yours and that reflects you and your personal style. Also, right now, interest rates are at record lows, and they will increase over time. The sooner you buy, the more you’ll save.
7. How much can I afford to spend?
According to Bankrate.com, a good guideline is spending about 25 percent of your net income on house payments. You can go as high as 32 percent, but anything over 35 percent is dangerous, because a higher income-to-housing ratio puts your home at risk if your finances change, such as a job loss or increased living expenses. Work with your mortgage lender to analyze your current income and expenses and to identify a comfortable mortgage level for your situation. Then you can start shopping for your dream home within your price range. If you don’t have a mortgage lender yet, talk to your Realtor® who can refer you to trusted resources.
8. Can I buy a home while I’m selling my current one?
Yes, you can, but that depends on a variety of factors. For example, if you buy another home before you’ve sold your current one, you may overextend yourself financially. To avoid this pitfall, you can make your purchase offer contingent upon the sale of your current home. There is also the possibility that you could sell your current home before you lock in a new one. Talk to your Realtor to discuss your options and get some recommendations given your individual situation and current real estate market conditions.
9. Besides a mortgage, what other costs should I consider when buying a home?
In addition to your monthly mortgage, you may have to pay private mortgage insurance (PMI) if you are putting less than 20 percent down on the home. You will have property taxes and any applicable city and state taxes. You’ll also have homeowner’s insurance. Some or all of these may be rolled into your mortgage payment, but you’ll want to find that out before closing. Also, you may have higher utility payments in your new home and homeowner association or condo dues may apply. Ask your Realtor for more information about monthly and annual costs.
10. How much should I offer for the home I want?
Your Realtor is your best guide for choosing the right offer price. Factors to consider will include the asking price of similar homes in the same area, the condition of the home, how long the home has been on the market, how much of a mortgage will be required, how much you really want the home and if other offers are expected for the same property.
Here’s a link to Part 1, ICYMI. Have additional questions? Type them in the comments below or reach out to an experienced Realtor you know and trust to answer your questions.
Thanks for reading!