It's a lovely time of year for change. Mother Nature wants in on the action with her ever-changing landscape, and perhaps, you, too, would like a change of scenery.
Whether you are relocating across the country or buying a home two doors down, there are several things you need to know.
First, can you afford to leave the rent behind and pay a monthly mortgage? With mortgage rates at an all-time low, for many the answer will be a resounding yes, but it pays to do some calculations first.
Let's start with a simple question. What kind of a down payment do you have set aside? Typically, buyers put down 20 percent. A lower down payment will often be accepted, but you will have to take on Private Mortgage Insurance (PMI). PMI is a fee added to your monthly mortgage bill until such time that you have 20 percent equity in your home.
Once you determine your down payment, now you need to add in closing costs of four to eight percent of the cost of the home. After these figures are subtracted from your money pile, now you need to figure out what you can afford each month.
Most banks will take your monthly gross income and divide by three. This takes into account your monthly real estate tax and home insurance payments in addition to your monthly loan payment (both principal and interest).
When figuring out whether or not this cost is doable keep in mind moving expenses and all of your other monthly expenses. Remember increased living expenses if you are planning to add children or subtract a salary in the near future.
Now you have an idea of how much house you can afford. What next?
Now is a good time to determine what type of house you are seeking. It is important to note that you want your home to fit your lifestyle, your future needs (as best you can determine them), and your personality. That charming cape at the end of a busy street may look terrific today, but if you are planning to have children in the future, the heavy traffic at all times of day may rapidly become a concern.
Before your first house hunting session with your Realtor, determine which amenities you must have and what you can live without. For example, if you entertain frequently, look for open and airy spaces with easy access to the kitchen and dining room areas and perhaps an extra bathroom or an entertainment/party room.
You may also want to consider access if you anticipate an elder relative coming to live with you in the near future.
Bottom line is a little planning can go a long way. Anticipating not only your financial needs, but also your long range goals, will go a long way towards making your first home as wonderful as your first love – something you'll always remember.