affordability

How much home can I afford?

January 19, 2016 by khproperties Leave a Comment

Knowing how much home you can afford can help you narrow your search and find the right home, but there are a lot of different factors to consider. You’ll need to look at the price of the home, sure, but you’ll also need to think about the interest rate on your mortgage, the property taxes, the cost of insurance, how much cash you’ll need up front at closing (from your downpayment to closing costs), and how much the home could cost you in the long run (repairs, maintenance, remodeling). Some of the costs can’t be easily calculated, such as repairs – who can predict when their AC system will conk out on them (this would be a good time to be covered by a home warranty)? Costs like taxes and insurance can be figured out for now, but will more than likely rise over time. Unless you get an adjustable rate mortgage (which are not as common as they once were), your interest rate will remain solid and the amount you pay for the house will remain fixed, although your mortgage payments may change if you use an escrow account for your taxes and insurance.

Calculating How Much Home You Can Afford

There is no shortage of calculators for affordability online and most of them are based on the same basic principles. Like most things, the outcome of the calculator is only as good as the data you put into it. Most affordability calculators will ask you a few basics: your income, how much money you’re going to put down on the home, how much do your monthly debts (car payments, credit cards, etc.) cost, and what interest rate you’ll be paying on your mortgage. Of course, that number can vary greatly, but you can usually get a basic estimate using the latest rates available online (you should probably overestimate rather than underestimate). Remember, your interest rate is based on multiple factors, so what you see online or your friend’s interest rate, might not be the same as yours.

More advanced calculators will ask you about property taxes (which you can look up online at your county appraisal district’s website), insurance (often the hardest to estimate as it is based on the house you intend to buy, but call your insurance agent and ask them for some roundabout numbers), mortgage insurance, and HOA dues. Some will even allow you to work backwards from the amount you want to pay a month.

The best way to get a true picture of not only what you can afford, but also what kind of loan products (and interest rates) are available to you is to sit down with a local lender and talk. They will ask you for the basic info (which is all subject to verification in order to get the loan) and show you what they see as your potential target for both a monthly payment and how much home you can purchase. Lenders will often give you a price range you want to stick to – the closer to that ceiling you get, the more you will need to tighten the budget to afford it. We recommend you don’t max out your limit there, so that you still have a cushion for when your water heater explodes in the middle of the night!

image courtesy of robef

How much do you need to earn to buy a house in San Antonio?

May 22, 2013 by khproperties Leave a Comment

Business Insider recently ran a report on how much money you need to earn in order to buy a house in twenty five different cities. San Antonio’s reputation as an affordable city remains safe, with a salary of $24,395.97 required in order to buy a house (these are based on basic factors that Business Insider collected and calculated – your situation might be different, so it’s always wise to check with a local lender). It’s interesting to take a look through the whole list and see what places are cheaper (like Cleveland, Ohio at $15,860.70) and what cities are more expensive (such as San Francisco, who tops the list at $97,330.11). It just goes to show that real estate is truly local, so always remember that when reading national real estate news.

image courtesy of gsloan

Am I Ready To Buy A House? Five Questions To Ask Yourself First

April 30, 2013 by khproperties Leave a Comment

The Big Question.

While the market has been heating up and interest rates have remained low, many people are asking the question; “Am I ready to buy a house?” Buying a home is (obviously) a big decision in anyone’s life and certainly not to be taken lightly. The question is important not just for first time home buyers, but move-up buyers as well. Is now the right time? Have I prepared sufficiently? Is the home of my dreams out there waiting for me? Can we sell this house and buy a new one? So many questions. Hopefully, the following thoughts will help you prepare and decide whether you are ready to buy a house or not.

Am I Ready to Buy a House?

Money, money, money. – The biggest questions, hands down, in determining if you are ready to buy a house are the questions of money. Buying a house takes money. There is no other way. Whether you pay cash or get a loan, you will still need money to buy a home, but there’s more to it than just what you spend at the closing table.

Down payment and closing costs are the big chunks of money you’re going to spend before you even get the keys to your new home. Whether you choose an FHA, VA, or conventional loan, you’re still going to need some cash. Even after you’ve considered the down payment, there are also closing costs. These range from the cost of getting the loan (lender’s fees) to the actual cost of the closing (title companies don’t work for free). Once a home is located and decided on, a much more detailed analysis of closing costs can be done and you can see the numbers and decide if you’re ready to buy this house.

Am I (credit) worthy? – Ahhh, the dreaded credit score. No one likes them. We’ve had people with excellent credit tell me their scores were terrible and we’ve had people with poor credit tell me their scores were amazing. There’s a lot of confusion surrounding credit scores. Your best bet? Sit down with a qualified, local lender (not an online source like LendingTree). They will review your basic finances, run a credit report, and if they can pre-approve you, they will give you a price range you can afford and estimates of what your monthly payment will be.

Many buyers we speak with are worried about visiting multiple lenders as they don’t want their credit score to go down (each credit inquiry in your file negatively impacts your score). In the case of home and car loans, as long as the queries are based in a short amount of time, you do not get penalized for multiple inquiries. You can review your credit report prior to visiting with a lender by visiting AnnualCreditReport. This site (unlike many others) is absolutely free. You can use it every year to keep track of what’s in your credit file. We suggest you take one report from one of the credit bureaus (Equifax, Experian, and TransUnion) once every four months. By rotating who you take the report from, you’ll be able to view your info three times each year. Knowing what’s in your credit report can help you know what needs fixed in advance.

Rent vs. buy. – One of the easiest things you can do if you’re renting and have begun to think about whether or not you’re ready to buy a house is to take a look at your current rent. First, when does your lease expire? If you just signed a new two year extension on your lease, you might want to stay put for awhile. A lease is a legal contract and breaking your lease often has negative monetary consequences. If you’re a few months away from the end of your lease, you might want to start thinking about it. The better you can time the switch, the less problem you will have when you tell our landlord you’re moving.

How much do you pay a month in rent? Do you scrape together each month’s rent by looking under the sofa cushions? Or do you pay it and still have money to save? If your budget is tight with your current rent, the goal of buying a house should be to pay less than you currently do. If the money is good and you’re actually able to save money each month, you might want to think of targeting that area as a monthly payment. Your lender will help you see the difference between rental and home ownership (there are advantages to owning a primary residence such as mortgage interest deductions).

Are you mentally (and financially) prepared for the challenge? – Ask any homeowner about their first home (or their current home) and they will tell you the same thing – “expect the unexpected.” This is why lenders push for cash reserves as part of their agreement to loan you the money to buy your house. Other homeowners will tell you of all the things they never thought of before buying a house. Although owning a home can be a lot of fun, it can also be frustrating at times – when your water heater blows in the middle of the night, when your sink or toilet backs up, when the appliances pass their useful life span and simply die on you – no matter what it is, there will be more costs associated with owning a home then you plan out. Being prepared is always a good thing.

“Now is a great time to buy.” – You’ve probably heard this phrase before. Sometimes we as Realtors overuse this phrase, even though the true question should be, “Is now a good time to buy for me to buy?” Although there are many excellent factors affecting the potential for a buyer to purchase a home right now, the simple fact remains, that you have to be comfortable with the purchase. Buying a home that you can’t afford or doesn’t suit your needs solves nothing. It will only hurt in the long run if you buy when you’re not ready.

image courtesy of Kansir