How Much Home Can You Afford?
For first-time home buyers, looking for Oxford properties can be a bit overwhelming if you’re not sure what you should be looking for. To some, it is tempting to purchase the first home they look at that is within their price range, while others will choose to continue to rent, forgoing the idea of homeownership for the time being. For those who are ready to take the step into homeownership and ultimate “adulthood”, here are a few things to consider when purchasing your first home.
When thinking about purchasing a home, it is important to figure out where homeownership fits into your long-term and short-term financial goals. For some, homeownership is a way to turn monthly rent payments into something tangible that they can call their own, while others picture homeownership as an indication of their independence and being an adult. Whatever your visions are, make sure that you find the right home for you and your goals for the future. To help you determine if owning a home is right for you, here are five questions to think about:
What type of home will be best suited to fit your needs and lifestyle?
When looking at homes, there are several different options available: single-family homes, duplexes, townhouses, condos, multi-family homes, etc. Each property comes with their own unique advantages and disadvantages, which you will need to consider to find the right property to fit your needs and lifestyle.
What will your ideal home include?
When looking at homes, it is a good idea to have a list of things that you have decided are necessities for your future house, along with a wish list of things you’d like to have. A home can be the largest purchase of your life. Therefore, you are justified in having expectations about what you purchase, and having your needs and wants met as closely as possible. Consider basics that you desire for your home, such as location and size. Also consider smaller details like bathroom layouts, and kitchens with trustworthy appliances.
How much mortgage do you qualify for?
Before you begin shopping, it is a smart idea to talk to lenders and get preapproved. This will give you an idea of how much is in your budget for home-buying. But remember that just because a lender approves you for a $400,000 home does not mean that you can actually afford the mortgage payments on that expensive of a home. Factors such as your debt-to-income ratio, and how long you’ve been employed at your current job, play a vital role in determining how expensive of a home you can really afford.
Generally speaking, in order to qualify for a home loan, you’ll have to have a good credit score. Therefore, it would be smart on your part to ensure that your personal finances are in order prior to speaking to a lender and getting prequalified. Remember, once you’ve been prequalified for a loan, don’t do anything to alter your credit score, like financing a car loan, otherwise your loan could fall through at the last minute.
What is your actual price limit?
Just because a lender preapproved you for a large sum of money, does not mean that in reality, you can afford it. For many first-time home buyers, they make the mistake of purchasing a home at the top end of their budget, and shortly find themselves to be “house-poor”. This means that after making their monthly mortgage payment, they do not have sufficient funds left to cover costs of utilities, vacations, clothing, entertainment, and in some instances, even food.
When purchasing a home, look at the home’s total cost, and not just the monthly mortgage payment. Look at how much of a down payment you can afford, and make sure to factor in property taxes, homeowners’ insurance, how much you plan on spending on maintenance and repairs, and closing cost. For those looking to purchase a condo or a co-op, you will need to include the monthly condo fees that will be an added expense.
How much money have you saved up for a new home?
Even if you qualify for a large mortgage, there are additional upfront costs that will need to be covered outside of the loan. These costs include the down payment and closing cost. When thinking about purchasing a home, it is important to have your funds in an accessible, yet relatively safe vehicle that will still afford a return. For those looking to purchase a home in one to three years, you might consider a certificate of deposit as a viable option to save enough money to cover the down payment and closing cost. For those who are looking to purchase a home within six months to a year, you are going to want to have your money liquid, such as in a high-yield savings account. Regardless of which option is right for you, make sure that your account is FDIC insured, should your financial institution go under.
Now that you have determined if you are ready to become a homeowner, how much you can afford, and where you want to purchase your new home, it is time to contact Kay Hightower. We want to show you the various beautiful Oxford properties, and one of them just might become your new home. As a leading real estate agent in Oxford, Kay Hightower can help you find the right home that will fit your needs, lifestyle, and budget. Don’t wait any longer to start finding the right home for you. Contact Kay Hightower today and get started on your journey to becoming a homeowner!