A home purchase is one of the largest financial decisions you’ll make in your life. Enter into the real estate market with your eyes wide open.
Every major purchase starts with a solid financial foundation. This means that not only should you be out of debt and have a good down payment in place (5-20% of home’s value), but a substantial emergency fund should be in place for unforeseen circumstances. There’s no value in buying a home, or anything else, that you cannot afford to upkeep.
The first step in any home purchase is loan prequalification (preferably underwritten preapproval). Not only will this process let you know just how much you can afford, but you’ll also be provided with a Good Faith Estimate which includes such things as closing costs, homeowner's insurance and property taxes. What these estimates don’t include are long-term costs such as maintenance and annual repairs. Experts have determined that homeowners spend 1-4% of a home’s value on just these items. For a $200,000 property, that means you may be spending $2,000–8,000 on average every year. When buying a home, be sure to calculate in costs of possible emergencies like the A/C going out in 115 degree weather.
The take away on this? Own your home – don’t let it own you!
Jana Haren, Realtor, MSSC
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