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Homebuyer Frequently Asked Questions

House For Sale Sign

Is It The Right Time For Me To Buy A House?

1. Are you ready to put down roots?

Think about your life goals, relationships and interests. How long can you see yourself living in the same location? Is your family going to need room to expand? Ideally, you'd want to remain in the home long enough for rising property values and your equity to exceed the costs of buying and selling, which can take a few years.

 

2. How's your job security?

A mortgage is a big commitment and can become a stressful burden after a job loss or decrease in income. Wait until your employment is stable before thinking about buying a house-it will protect you in the long run. 

 

3. Are you financially prepared? Here are the three main topics to evaluate:
 

a. Savings: You'll need money for a down payment, mortgage closing costs, and for moving and other expenses after you buy the home. Down payment requirements vary by the loan type, so know there are options for little to no money down if you qualify. Keep in the back of your mind: the more you put down, the lower your monthly mortgage payment will be.

b. Credit: Lenders generally offer the best mortgage rates and terms to borrowers with credit scores of 740 and above, although you can qualify for a mortgage with a score in the 600s. If your credit is marginal, it might make sense to postpone buying a house and use the time to work on building your credit.

 c. Debt: Lenders look at your debt-to-income ratio or DTI, to help determine whether you qualify for a mortgage. Your DTI is the percentage of your monthly gross income that goes toward monthly debt payments, including housing costs, as well as installment loans (student loans, auto loans), credit cards and other debt obligations. 

As A First Time Home Buyer, What Expenses Should I Be Prepared For?

1. Maintenance and Repairs: When you're renting and your HVAC system breaks down, your landlord is responsible for footing the repair bill. When you own your home, you’ll need to cover all of the costs of repairs yourself. If you own a single-family home, you can expect to pay 1-3% of your homes value in maintenance and repairs. You might spend even more each year if your home is older or in need of repairs. It can be a good idea to start an emergency fund before you think about buying a home. An emergency fund can help you cover costly repairs if an urgent situation arises. This should be separate from your down payment and easily accessible, such as a savings account. 

2. Furniture and Appliances: Depending on the condition and size of your home, you may need to purchase everything from new blinds to new lighting fixtures. This can quickly become an expensive endeavor so if you can reuse any furniture you already have, that will help offset some upfront costs. You may also need to buy appliances for your new home. When you shop for a home, ask the previous owner what appliances the house comes with and which they’re taking along with them.

 

3. Homeowners Association Fees: You may also need to budget for homeowners association fees, which is completely separate from your mortgage payment. These cover the cost of maintaining community common areas. The amount you’ll pay in HOA fees depends entirely on where you live. HOA fees can be anywhere from a few hundred to thousands of dollars a year, depending on your amenities. The average single-family homeowner pays $200 – $300 a month in HOA fees.

4. Utilities: You may have paid a portion of your utilities when you rented a space. Your landlord might also have agreed to take care of a few monthly bills on your behalf. As a homeowner, you’ll need to cover 100% of the cost of heating, cooling and lighting of your home. Home utility expenses can quickly turn into a much larger bill than most new homeowners expect. 

Before you move into your new space, it’s very important that you remember to transfer over all of your local utilities to your home. Research each of the utilities you need to pay and make sure that local utility companies know that you now live at the address. This will help ensure that you receive your bills on time and don’t accidentally miss a payment.

Owning vs Renting Pros & Cons

Pros of Buying:

  • Build equity: As you pay down your mortgage and the home value increases, you'll gain equity in the home. You can borrow against the equity to finance other big goals. You could also sell the house later, then keep the money or use the profit for a down payment on your next home.
     

  • Tax benefits: As a homeowner, you're eligible for tax deductions on paid interest, property taxes, and home improvements when you file taxes each year.
     

  • Customize your home.  You finally have the power to update the home when you're the owner. (Just make sure any big changes are approved by your home owners association if you have one)

Cons of Buying:
 

  • Monthly payments could change. While your principal and interest payments should stay the same, other costs will probably rise, such as increased homeowners insurance premiums and property taxes.
     

  • Maintenance. Your landlord takes care of home repairs when you rent. Once you buy a home, you're responsible for the time and money that go into maintenance.
     

  • Less flexibility. It's harder to pick up and move when you own a home than when you rent. You have to list and sell the home, hire a realtor, and pay closing costs.
     

  • Home value could decrease. By the time you move, there's no guarantee that your home value would increase as much as you expect, which could affect your finances later.

Pros of Renting:

  • No long term commitment: Once your lease is up you can move anywhere you want with less of a hassle.
     

  • No responsibility for repair costs: Your landlord or leasing office is responsible for taking care of most of these for you.
     

  • Minimum maintenance: Depending on where you live, all of this could be taken care of for you.

Cons of Renting:

  • No tax benefits: While this may not be a deal breaker for some, for others it’s a very big deal.
     

  • You're stuck waiting on your landlord or leasing office to make any repairs needed: Your landlord may be in no hurry to repair things or they may do it cheaply so it ends up being a problem again.
     

  • Payments are not fixed: Your rent could go up drastically year over year since it's not a fixed rate.

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