Now that you know what you’re looking for, the next step is figuring out what type of home you can afford. A review of your income, savings, monthly expenses, and debt will be necessary.
Early on in the process, you will need to get pre-qualified for a mortgage loan, which helps determine how much you can afford. It enables you to move swiftly when you find the right home, especially when there are other interested buyers. It also indicates to the seller that you are serious and can afford to buy the property. A pre-approval is a simple calculation done by a mortgage lender that tells you the amount you’ll be able to finance through a loan and what your monthly payment will be. When you find a home to buy, a pre-approval also reassures the seller that you have the financial means to purchase his or her home.
Know what you can afford is the first rule of home buying, and that depends on how much income and how much debt you have.
The price you can afford to pay for a home will depend on several factors, such as:
- gross income
- the funds you have available for the down payment, closing costs and cash reserves required by the lender
- your debt
- your credit history
- the type of mortgage you select
- current interest rates
Another figure lenders use to evaluate how much you can afford is the housing expense-to-income ratio. It is determined by calculating your projected monthly housing expense, which consists of the principal and interest payment on your new home loan, property taxes and hazard insurance (also known as PITI).
Each buyer is unique and a mortgage professional can help you find out just what you can afford. Your income and your debts will typically play the biggest roles in determining your price range. It’s simple to make an estimate, just run the numbers for yourself using our Affordability Calculator.
Building a new construction home or buying a resale home – which is right for you?
If you’re on the market for a home, you may be asking yourself whether it makes more sense to build a new home or buy a resale home. If you are looking to buy a home, it’s a big decision. The answer depends on what is important to you.
Advantages of an existing neighborhood
Established neighborhoods with lived-in homes have much to offer. If the neighborhood has been around long enough, trees may canopy the streets and the landscaping may be lush and mature. It is hard to beat the charm of an established neighborhood that is already lined with well-loved family homes. It’s a place you can easily imagine walking the dog or strolling with the family. Another advantage of a resale home is that you can move in relatively quickly. With a new construction home, you often have to wait for construction to be completed. It could be six months or more, depending on delays from the weather or supply shortages. A resale home is ready at closing, often just 30 to 45 days after making an offer. That beats having to stay in a cramped apartment waiting for your home to be built. There is also convenience involved with buying an existing home. You won’t have to put up with construction traffic through your neighborhood as other homes are completed and you already know what surrounds your home. Also, a resale home can usually be purchased at a better value per square footage than new construction. You often get more house for the money with a resale home.
Advantages of a new construction home
Like the idea of being the first to live in a house, picking out its features for yourself? Then new construction may appeal to you. Although new neighborhoods may lack certain charms of an older neighborhood, in many ways new neighborhoods may be more desirable. The location of a new neighborhood is one of its best features. New neighborhoods tend to go up on the outskirts of town, where the new growth occurs in a community. That often means new schools for all of these new residents. It can also mean new shopping centers to accommodate that growth, too. You’ll often find big box stores convenient to new construction neighborhoods. New neighborhoods also tend to have great amenities. Today, everyone wants workout facilities, playgrounds, open spaces, swimming pools, etc. in a neighborhood. A resale home may not be able to offer much of that, but new construction homes often feature these amenities. Many new neighborhoods often have social functions centered around its pool, open spaces, etc.
Love a nice lawn but hate spending your Saturdays taking care of it? Well, a trend in new construction communities is to have lawn maintenance provided with your homeowner’s dues. No more getting up early on Saturday morning to beat the heat to mow. New construction homes also offer a chance to be friendly to the environment. New construction must be built to abide by the latest regulations, but that also means that they are usually more energy efficient than a resale home. That could equal savings to you each month on your utility bills. Weigh the pros and cons of buying a resale home vs. building a new construction home. Know your tastes and what is important to you when making this decision.
Which ever choice is right for you, The Alt Group can help you.
