Financial, Uncategorized

How Big a Mortgage Can You Really Afford?

Whether you’re a first-time home buyer, you’ve grown out of your current home or maybe you’re looking to downsize after the kids have left home, you may be scratching your head and wondering just how much home you can afford. Home ownership should offer you a feeling of security, not leave you feeling destitute!

So why not just go by lenders guidelines and borrow what they deem appropriate? Well, a mortgage lender won’t take into account your current and future financial goals. Do you plan to have children? You’ll need to factor in childcare costs or maybe the loss of income of one spouse. Maybe you want to return to school eventually. All of these things must be considered!

Old rules generally said you can afford a house 2-3 times your income. So if you earned $100,000 annually, you’d be able to afford a $200,000 – $300,000 home. But what if you have $1,500 a month in car payments, student loan payments, credit card bills? The best way to break down those sort of expenses that are of utmost importance is to make a detailed budget. Factor in things like mortgage payment, homeowners insurance, taxes, HOA fees, utilities, etc.

Now, a huge part of how big of a monthly payment you’ll have is how much of a down payment you can afford. The larger the down  payment, the lower the monthly expense. Many lenders also require private mortgage insurance (PMI) on loans with less than 20% down. You also have to factor in what sort of market it is – if you wait around trying to save, you may end up paying more for a home.

Take into account your monthly debt. Most lenders play by the “43% rule.” So using the $100,000 scenario above, we come to $43,000 in annual income. Divide that by 12 and we get $3,583. That means all bills, mortgage included, shouldn’t exceed that number.

Use your monthly rent as a guideline. Tax benefits of home ownership allow you to spend about 1/3 more than your rent. So if you’re currently spending about $1,500 a month on rent and you’re not struggling to make ends meet, you should be able to comfortably afford about $2,000 a month on a mortgage payment.

 

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What are Millennials Looking for in a Home?

We’re used to thinking of “home” as a universal concept, but the younger generation is turning that notion on it’s head a bit. Home-buying millennials typically fall into the 18-35 year old range and are known for being tech-savvy and knowing exactly what they want in a home. As a seller, it’s important to know what this generation is looking for, because it’s expected they’ll make up about HALF of the first time home buyers in 2017!
Many millennials are moving from renting in an urban environment but as they get older and start thinking about having a family, they prefer to leave the city for a suburban setting with easy access to public transport.  This is good news for sellers in the suburban Philadelphia area – homes in Montgomery County are just a quick Septa ride away from the city!
Now, let’s think about what exactly these buyers are looking for. Since most are using almost all of their savings on a down payment, they want something move-in ready, generally. That’s not to say there aren’t millennials looking for fixer-uppers, but the majority don’t want to have to spend money they don’t have getting their home up to par! Things like updated kitchens, baths and hardwood are crucial. If your home is carpeted, be sure to specify if their is or isn’t hardwood underneath.
Staging is also a crucial element to attract these buyers. They want to be able to look at your home (and they’ll be looking online first – so it’s important to get your home ready to go viral!)  and imagine what it’ll be like when they’re living there.
Something that’s fairly new in the real estate game is smart home technology. This is essential for young buyers. They want to be able to come inside and control the lights, the heat, even open the front door with their smart phones! This may seem a bit confusing or overwhelming, but fear not! Coldwell Banker, a leader in innovation, has you covered with our Smart Home Staging Kit. You can learn all about Smart Home technology there or contact one of us at Coldwell Banker Realty Corp. We can talk you through the ins and outs and get your home “millennial ready” painlessly!
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Feeling the itch to buy your first home?

Maybe spring fever has hit you. The temps are (slowly!) climbing, the poor tulips and bulbs are trying to peek through under the late-season snow we had last week and all you can think about is the warm weather and entertaining guests in a home of your own. But, where do you start?

STEP ONE

First things first, get your credit sorted. Most lenders require a credit score of 620 or above, so know your number. Check your credit history for any issues before contacting a mortgage broker. It’s free to check once a year!

STEP TWO

Save money! In all likelihood, a home purchase will be the biggest purchase you’ll make. You’ll need to factor in a down payment of some sort, closing costs, various inspections, etc when you’re buying, so keep that in mind.

STEP THREE

Find a mortgage broker you trust and figure out your budget. Tell him or her what you’re willing to spend and be prepared to delve into the nitty-gritty of your finances. But don’t fret – this is his or her job, so no need to be shy! Be prepared to fax or email a few recent pay stubs, 2 years of W-2s, 2 years of tax returns and a few recent bank statements.

 

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STEP FOUR

This crucial step ties into step three. You’ll need a preapproval from your lender before you can get to the fun part – seeing homes with your agent! This letter states that your lender has received all of your documentation and is comfortable lending you the amount of money you’ll need to see aforementioned homes.

STEP FIVE

Decide where you want to live! Are you a city person or do you need a bit more space? If you’re moving to a new neighborhood, drive around! Check out street view. Get comfortable with the area.

STEP SIX

Find an agent you connect with at Coldwell Bank Realty Corp. No one knows the area like we do! Our team works together to help make the process as smooth and stress-free as possible. You’ll be settled in your new home and have a new friend to invite over – your agent!

And fear not! The experienced agents in our office are happy to help guide you through the process and help you learn along the way. We understand the uncertainty that comes along with buying your first home and we’d love to be the ones to make the experience of finding the home you’ve always imagined a wonderful one!

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