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.

 

Uncategorized

Raise Your Home’s Value Instantly

If you are planning to put your home on the market this spring, your real estate agent may be telling you to declutter, or work on your home’s curb appeal or even stage your home. Some of the things on your to do list may seem tedious or downright expensive, but it turns out that you’re actually receiving sound advice.

HomeGain, an agent referral site, has identified the top 10 home improvements under $1500 that add the most value. We’ll break it down your returns on investment (ROI).

  1. Cleaning and decluttering ($290 cost / $1,990 price increase / 586% ROI)
  2. Lightening and brightening ($375 cost / $1,550 price increase  / 313% ROI)
  3. Home staging ($550 cost / $2,194 price increase / 299% ROI)
  4. Landscaping ($540 cost / $1,932 price increase / 258% ROI)
  5. Repairing electrical and plumbing ($535 cost / $1,505 price increase / 181% ROI)
  6. Kitchen and bathroom ($1,265 cost / $3,435 price increase / 181% ROI)
  7. Replace or clean carpets ($647 cost / $1,730 price increase / 169% ROI)
  8. Paint interior ($1,012 cost / $2,112 price increase / 109% ROI)
  9. Repair floors ($931 cost / $1,924 price increase / 107% ROI)
  10. Paint exterior ($1,467 cost / $2,222 price increase / 51% ROI)

Some of these items on this list could even be done for cheaper if you’re enterprising and do it yourself, making an even larger return on investment!