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How to Determine if You Can Buy A Home
There are lots of Fluff pieces out there telling people that they can afford a Home. For the First Time Home Buyer it often can be an unnerving experience. Besides Credit Score and Debt Ratio,
I often find that people caught up in the total amount that they qualify for. Example I qualify for a $500,000 home. Just because your are qualified for $500,000 doesn't mean you have to buy up to that amount unless you are comfortable with the monthly payment? Which leads back to my strategy for First Time Homebuyers. I typically will ask them, 'How much could you pay for an ideal monthly payment'? By Ideal Monthly Payment that would a a monthly payment that allows you to pay your car note(s), credit cards and installment payments, auto insurance, pay utilities, buy gas and food and to put money in Savings for emergencies.
Going back to my example for a $500,000 home.
If you are comfortable putting making a 20% down payment? Your monthly payment including Principal, Interest, Taxes and Insurance would put you around $2648 a month at a 4.0% interest rate. Can you afford that and meet your monthly obligations? If you consider putting less money as a down payment it will make your monthly payment higher plus you typically will pay PMI, Private Mortgage Insurance. Where basically you are paying Insurance to protect your Lender in the case that you default on the loan. My goal is to put you in a home to stay in until you outgrow it or want to downsize.
For the same $500,000 home if you put down 3.5% at the same interest rate. Your monthly payment goes up to over $3042 not counting PMI, which could make the monthly payment easily $3100 a month for the same home. And PMI can not be written off on taxes like Interest and Taxes.
There are Loan Program options out there to avoid PMI like 10% and 15% down Conventional Mortgages, VA (Veterans Administration) loans, FHA Plus and more.
I often encounter Buyers that don't want to get Pre-approved for a mortgage. I'm not sure if they are afraid of what they may hear or if they just like looking for homes for a weekend outing. But looking for a home without getting pre-qualified is often just 'Window Shopping' and this is why. To make an offer on a Home you must include a Lender Pre-Approval Letter with your offer or it won't be accepted. No Seller is going to take their home off the market and risk missing viable Buyers on the chance that may not get approved for a mortgage. The other thing is why look at homes that you may not qualify for? It will only make you feel bad when you see that you can only buy lesser homes and could discourage you from wanting to Buy. Or in a best case situation? You may find that you can afford more home and than your originally thought.
During my Buyer Consultations besides sharing my Buyers Guide which explains the steps in the Buying Process. I recommend Lenders if you don't have your own lender that you prefer to work with? I even encourage my clients to talk to 2 to 3 lenders to shop rates and make lenders fight for your business to get your the best interest rate and terms for your mortgage. Contact me anytime to discuss your real estate goals. To connect your with Lenders, Home Inspectors or General Contractors to get your home ready for market. I can even give you comps to show what your home may sell for and recommend updates as well as repairs to make your show its best to make it sell for Top Dollar. You can also go to my website Lender Page to find Lenders to help you get Pre-Approved Recommended Lenders
Blog Archive2019-10-30 11:43:07
How to Determine if You Can Buy A Home
Buying a Short Sale? Keep This in Mind
Tough Buyers Market
Manassas - Prince William County's Hidden Gem
Why You Need A Buyers Agent?
Don't Sabotage Your Home Purchase - Things To Not Do