Now is a great time to look at buying a new home. The past couple years we have adapted to say the least and being at home took on a whole new meaning. You may have learned some things during this time like maybe your home is just not big enough, or you need an office space, or maybe you are tired of renting. Whatever, the reason may be this could be the perfect time to lock in pricing, low interest rates and limited existing homes. Take a look at the latest collaboration and get some of these questions answered by Lindsey Svir with Valley Mortgage and Jessica Metcalf from Thomsen Homes. These two will discuss some of the big questions you may have on the financing side of building a new home and the process to get started.
Should you buy or should you rent? This is a popular topic that is often brought up around the Thomsen Homes office, especially if you are a first-time homebuyer. There are advantages and disadvantages to both renting and buying a new home. An article by Landon Dowdy on cnbc.com discusses the facts between buying a home and renting a home for millennials. Below is a snippet of the article to help you decide if buying or renting is right for you. Still have more questions? Contact us and we’d be happy to answer any questions you may have.
Here’s where it makes sense to rent:
You have limited funds. If you don’t have the money for a down payment and additional costs of owning a home, renting is the best option. Use rent-versus-buy calculators at Trulia or Bankrate.com to see what you can afford.
You are uncertain about your employment. If you are unsure about your job situation or living paycheck to paycheck, focus on conserving cash for future living expenses and building up your emergency fund, said Evelyn Zohlen, a certified financial planner and president of Inspired Financial in Huntington Beach, California.
But you are better off buying if:
You can cover the additional costs of owning. Make sure you can pay the down payment and closing costs before buying a home. “Most banks still want a 20 percent down payment,” said Ryan Severino, a senior economist and director of research at commercial real estate data provider REIS. So if you are purchasing a $250,000 home, a 20 percent down payment would be $50,000. That’s in addition to a typical 5 to 6 percent in commissions plus another 1 percent in closing costs. Maintenance costs are also a big factor to budget for.
You plan to stay in the home at least five years. It’s best to buy when you have the “long-term horizon,” Zohlen said. Staying in a house that you buy for five years or more means you are more likely to recoup what you paid in transaction costs and generate a return on your investment.
You want to reap the financial benefits of homeownership. Low interest rates make homeownership attractive because it decreases the amount borrowers pay on their loans. Mortgage rates remain near record lows after the 2008 financial crisis. The average rate on a 30-year fixed-rate mortgage is 3.9 percent, according to Bankrate. If you itemize your federal return and don’t qualify for the alternative minimum tax, you can deduct your mortgage interest and property taxes from your tax obligations. And most importantly, you can build equity in your home, something that isn’t possible with a rent payment.
Realtor.com has a useful calculator that will help you calculate the net cost of buying a home vs. the cost of renting over time. Use this beneficial tool to help you decide.
Buying a home is a huge purchase and the more prepared you are the better off you are. An article by Cathie Ericson on realtor.com discusses 5 habits you should start now if you’re planning on buying a home in 2017. If a goal of buying a home is in the near future for you and your family these are some great ways to start preparing so you can achieve that goal and move into a new home in 2017. Below is a snippet of the article and how you can be successful in starting this process.
Habit #1 Buying a home: Automate your down payment savings
If you’re trying to squirrel away the recommended 20% down payment, that works out to about $40,000 for a $200,000 home. That’s a huge chunk of cash, so unless you’ve been the recipient of an inheritance or have recently won the lottery, you can never save too early or too much.
“The down payment takes more money than 99% of people plan for,” warns Joshua Jarvis of Jarvis Team Realty with Keller Williams Realty Atlanta Partners in Duluth, GA.
Yet one practically painless way to get started is to automate your checking account to regularly set aside a small amount of your paycheck into a separate savings account dubbed your “house fund.”
“Amassing enough for a down payment takes discipline and perseverance, but setting up automatic savings can make it easier,” points out Realtor® Marcia Goodman with Re/Max Gateway in Gainesville, VA. “If you never see the cash, you won’t spend it.”
And you don’t have to put down the full 20%, either—there are other options. But it’s best to save as much as you can.
Habit #2 Buying a home: Build your credit history and keep it clean
To get a mortgage, lenders will want to see evidence that you’ve paid off past debts. As such, keeping on top of your credit cards and car and college loans is a crucial mortgage must-do.
But don’t steer clear of credit altogether. If you’ve never had a credit card or a bank loan, you won’t have a credit history. Once you have credit established, keep it pristine. Pay all your bills on time—this cannot be overemphasized.
“I had a client who made $250,000 a year and was denied a mortgage because his credit card payments were always late,” says Alexandra Axsen, managing broker of Lake Okanagan Realty Ltd. in Kelowna, BC.
Dean Sioukas, founder of Magilla Loans in Sacramento, CA, also advises not using more than 30% of your available credit, as recommended by the credit bureaus.
(Read the full article of the 5 habits here)