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Can You Afford To Buy A Home?

January 15th, 2013 9:24 am

Thinking of becoming a first-time homebuyer? There are certainly a lot of incentives to do so right now, including low prices and record low mortgage interest rates. But are you ready to take that step?

The biggest question, of course, is can you afford it? But that’s an issue that goes beyond the simple matter of whether you can fit a mortgage payment into your current budget. Do you have enough for a down payment? Have you budgeted for insurance and taxes? What about maintenance costs? If you’re looking at a condo, what about association fees, which may increase significantly over time? There are a lot of other expenses besides the mortgage that go into the issue of home affordability.

How much do you really want to spend?

The first question is, how much do you really want to spend on a home? Many home buyers jump into buying the nicest home they can afford without really thinking about how it will affect their lifestyle. Do you want to tie up all you extra earnings in a mortgage, or would you like to have more available for things like vacations, entertainment, hobbies and investing for the future? You might conclude you’d be more content with a more modest home that allows you to pursue a more bountiful lifestyle in other areas.

Have you saved up enough for a down payment? This goes beyond simply meeting mere minimums – you can get an FHA loan with as little as 3.5 percent down – but do you have enough of a down payment to get the interest rate you need? To get the lowest rates, you’ll likely need a down payment of 20 percent, in addition to excellent credit. Although lenders have eased their down payment requirements somewhat compared to a few years ago, anything under 20 percent still means you’ll have to pay private mortgage insurance  (PMI) – which is like jacking up your interest rate by another one-half to a full percentage point.

Look out for maintenance costs

What about maintenance costs? These can be a rude surprise for many new homeowners. On something as big as a house, things are always breaking or wearing out and have to be fixed or replaced. And older homes tend to need more care than newer ones – they’ve had more time for things to wear out. It’s a good idea to have several thousand dollars beyond what you’ve saved for a down payment to hold in reserve for emergency repairs. Expect to average at least a few hundred dollars a month in things that need to or ought to be fixed or upgraded – particular when time comes due for a new roof or furnace.

Finally, how stable is your income? Do you feel secure in your job and that you’ll continue to earn as much a few years down the road as you are today? What about your spouse, if you’re counting on their income? In today’s economy, it’s a major concern. Also, what other expenses might crop up down the road? Can you handle an unexpected outlay for a new car if your current one gives out? Do you have children whose needs will increase as they get older?  All these need to be taken into account.

Becoming a homeowner can be one of the best investments you’ll ever make for yourself and your family. But to make sure it turns out that way, you need to take a careful look at all the economic angles to make sure it’s a good fit for both you and your budget.

Making Home Construction

July 13th, 2012 12:00 pm

The dream job with the six-figure income is finally in your grasp and it’s time you moved out of your dumpy apartment and into the house you’ve always wanted. Only problem is, well, you’ve looked and looked but haven’t found a house that is you. Yes, you’ve found nice houses but none of them were “the one.” After a solid two months’ looking, you decided you would just build your own house. You bought a nice lot and hired a good contractor but now you want to be sure that all your bases are covered. Well, there are a few tips you should remember as you talk with your contractor about the basics of your home construction.

Make sure you have the builders put in the right size doors for your garage. The last thing you need is to come home for the first time to find your Escalade doesn’t fit in the garage. Along these lines, you will also want to be sure that you know how many cars you want your garage to accommodate before you have the building begin. Do you want a two-car garage or a three-car? Detached or attached? These are all considerations that you want to consider now, before the foundation is laid and it’s too late.

Another home construction option to consider is a sink in your utility/laundry room. When the kids are coming in from playing pick-up soccer and their clothes are all muddy, it will be nice to have somewhere that they can dump their dirty socks and shoes without tracking dirt all through your house. An extra-deep sink is a good idea so that you can fill it with water to wash things or thoroughly clean different items. Just be sure that you have this included in the blueprints so your contractor can plan for the appropriate plumbing.

How many bathrooms do you want? It’s a good idea to have a bathroom in the master bedroom and at least one bathroom for every two other bedrooms. Be sure to consider if you want a full bath downstairs for guests or if you want a half-bath in the foyer. Make sure that you have these decisions nailed down before foundation is laid – once that cement goes down, it’s too late to make changes.

Consider how much of a backyard you want. It can be great to have the mansion you’ve always dreamed of but if your backyard is the size of a postage stamp, is the extra square feet in the house really worth it? It is if you don’t plan to spend any time in the backyard but this is something you should think about while the blueprints are still in the design phase.

The number one consideration you want to make is whom you trust with your home construction. This is somewhere that you will, hopefully, live for a while. It is a dream.

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