Question of the Week
A Reference Guide for Homebuyers
The housing market has been super hot since we’ve been coming out of the pandemic. I have several clients starting or growing through the house buying process.
According to Bankrate, the average 30-year fixed mortgage is 3%, which seems unbelievable. But, of course, you can go even lower than that if you get an ARM or a 15-year fixed.
I put together a quick reference guide so homebuyers and homeowners can find all of the info they need in one place. Here is what you need to know:
- At the outset, you should figure out whether you are better off renting or owning in your situation.
- Start preparing your budget now. I’m a huge fan of bucket budgeting. And with a house savings bucket, I suggest three sub buckets: down payment (10-20% of the purchase price), closing costs (2-3% of purchase price), and money for furnishing and moving (depends on house size and budget).
- If you’ve determined that you want to own, you have to get your priorities in line: understand what you can afford, get pre-approval, and then look for a place.
- It will also benefit you to shore up your credit as much as you can, so you can get the best interest rates out there.
- Once you find a place, putting an offer in, and getting it accepted, you are just the tip of the iceberg. You will have to jump through several hoops to close the deal.
- Again, when securing financing, make sure you have the proper budget in mind and understand how different circumstances can affect your interest rate. I’m a huge fan of taking the most extended term you can get to give you more flexibility with your payments and paying faster to cut your total interest paid.
- After you close, don’t forget about the extra costs of moving into a new place and how possible improvements will affect your taxes.
- Lastly, revisit your budget to consider all the new expenses you may not have anticipated once you’re in your place.
- If you’re thinking about refinancing, take a look at this calculator, which will help you assess how much money you could save and the breakeven period, which represents the number of years you’ll have to make your new monthly payment before you recoup the costs of refinancing.
Those are the fundamentals. I have plenty of more posts regarding home-owning, so make sure to check out those posts as well in the archive.
Quote of the Week
“The ache for home lives in all of us, the safe place where we can go as we are and not be questioned.” – Maya Angelou
Task of the Week
If you’re in a position to take advantage of these low-interest rates, start assessing where you are in the process with the links above and start gathering info that you may need for pre-approval. That will likely include:
- Tax returns and income documents for 2019 and 2020
- Checking and Savings account statements for the last 60 days
- Pay stubs inclusive of the past 30 days
- Profit and Loss for 2021 if you own a business
- IRA and 401k/403b quarterly statements