When buying a home, consider what you can realistically afford. There is so much more than the purchase price of a home in regards to how much that house really costs. What is the real cost of buying a house in Bennington Vermont?
Your first step in buying yourself a home is to find out not only how much a bank will loan you but ‘if’ the bank will give you a loan. With the stricter regulations that the mortgage companies are facing now, they look at every little aspect of your financial life before making their determination. Don’t assume you know what you may be qualified for. Make an appointment with the mortgage loan person at your local bank and discuss the ins and outs of mortgage financing.
You will learn what the total amount will be that the bank considers reasonable for you to borrow based on your income and expenses. The current interest rate plays into this equation, as the higher the interest rate, the higher your monthly payments will be. That is why, when the rates are low, like they are now, you can afford to borrow more money.
Property taxes also play a large role in affordability. Typically the mortgage company will set up what is called an Escrow Account. With each of your monthly payments, you will also be paying a portion of your yearly property taxes and sometimes your insurance costs as well. When your taxes and insurance comes due, the mortgage company will make those payments for you. Think about it this way. If your property taxes are $3,000 per year, that would be $250 per month added to your house payment. That extra amount can be a stretch for some people in their monthly budget but believe me, when that $3,000 tax bill shows up and you know you’ve already paid that money in and don’t have to figure out where to find that money, it’s a huge relief, knowing the bank has got you covered. Pay attention to the yearly taxes when looking at potential homes and divide that amount by 12 to know what your extra payments will be.
Mortgage companies and Banks sell money. That’s how they make money. They not only make their profits by the interest money you are paying them each month but also in selling you the loan to begin with. They also make money by selling your loan to other banks and financial institutions – but that’s another blog.
A very important factor to consider is what your closing costs will be. How much cash do you need to bring to the closing table in order to buy a house? Your mortgage person will prepare a Good Faith Estimate that will give you a very good idea as to what this number will be. You will see things like an Origination Fee, Application fee, down payment, points, attorneys’ fees, appraisal, recording fees, transfer tax, escrow account, etc, etc. These numbers can add up quite a bit and you need to be certain that you are prepared to come to the closing table with check in hand. Some mortgage programs allow for the Seller to help contribute to those closing costs so be sure to ask your mortgage broker as well as your Realtor about such things.
So let’s say you’ve come this far, you are approved for your loan, have money saved for closing costs and you’ve bought a house. Now what? Smooth sailing, right? You aren’t paying rent any more, this is YOUR home!! Yea. Great. But wait, what else are you going to be paying for? Besides actually moving in, utilities will be your first expense. If you don’t already have an account with the electric company, expect to pay a deposit and sometimes a fee to get hooked up. Do you need propane for heat or cooking? Speaking of heat – make this a priority to check out. Depending on the time of year, you want to lock in a low rate or prepay for your fuel. Ask around to several fuel companies and see what they have to offer, especially for a new customer. Don’t find yourself in the middle of winter paying top dollar for fuel. Heat, in this part of the country, is not an option.
Most people have cell phones now and don’t bother with a land line but if you are in an area that does not yet have cell service, a land line is necessary. Emergencies do happen and you don’t want to be without access to emergency services. We pay for TV these days, not like in the ‘old days’ when we all had antennas on our roofs. Is cable available where you live or do you need a satellite dish? How will you access the internet?
Got all of this covered? Great. So now what. Another critical factor in being a home owner is maintaining your investment. Ask yourself, can you handle the repairs that will come up, most at inconvenient times, such as a hot water heater that fails, appliances that need repair or replacing. What if that roof is on its last legs – that’s a big one. How about your furnace? Do you have a septic system, a well? Are you handy? Are you capable of minor repairs such as painting, replacing light fixtures, small plumbing jobs?
Keeping your house well maintained is the number one thing you can do to not only retain the value of your property but to increase that value. A well maintained house is a good listing as far as us Realtors are concerned – it’s a sale. One that is worn, lacking upkeep, obviously not taken care of is a red flag to any future buyer. They don’t want to inherit problems and issues that could have been avoided by someone taking the time and money to keep a house in good shape.
Now is a fabulous time to buy a home. Rates are low, lots of houses on the market, the economy starting to look up. Just do your homework first. Ask questions, gather information, take time to discuss the process and the finer details with a mortgage broker and your Realtor. Then – go out and buy yourself a home.