Here are a few insider tips to consider before making your next real estate purchase.
Tip #1: Defining What You NEED In Your Next Home.Two things you have to consider here: Your NEEDS… and your WANTS. They’re two altogether different things.
You may require four bedrooms in view of your kids, or need a 3-car garage due to your three cars.
What you’ll discover is your needs are genuinely fundamental. The “wants” take somewhat more time to clear up. Here is a rundown of requirements you need to consider before searching for your home:
- General purchasing price range. We’ll cover this later when examining financing choices and the purchasing power you have.
- General size of home (sq. ft.). Make it a rational goal.
- General area, district, or subdivision.
- Number of bedrooms required. Keep in mind guestrooms and studies.
- Number of bathrooms you require. Often controlled by the size of your family.
- Style and design of home. Do you prefer a more formal arrangement, or a contemporary arrangement with unique floor plans, and so forth?
- School preferences.
Tip #2: Defining What You WANT In Your Next Home.A useful approach to understand your wants is to review your present home. What have you enjoyed about it? Do you like its open floor plan? Do you like the kitchen and eating arrangements? Do you like the recreation areas?
Rattle off all that you have come to enjoy about your present home, or homes you’ve been inside.
Then, investigate what you don’t care for about your home. Do you dislike the level rooftop? Do you not care for the family room format? Are the rooms too cramped? Is the distance between the kitchen and front door too far?
Anything you don’t like about your present home, you’re not going like in your new home. So the better you can distinguish these characteristics, the easier it is for you to stay away from them.
Here’s a recommendation: Take out a bit of paper and draw a line down the center. In the left segment, record everything you like about your present home. In the right section, record everything you don’t like about your present home. It’s additionally critical that you know WHY you don’t like something.
Next, from your list of “preferences,” note the elements you want for your new home. Here’s a good tip that will help you fine tune your core interest.
Take out another sheet of paper and put two sections on it. On the left hand side, you will itemize the features you want of your home. Then, on the right hand side, you’ll itemize the advantages. For every feature, you need to list its advantage.
Features let you know what something IS: four bed, two bath, garage, and so forth. Advantages let you know what something DOES. Advantages satisfy wishes.
For instance, an open floor plan (feature) will be perfect for having loved ones over at special occasions (advantage). So on the left hand side, you would put “open floor plan.” And on the right hand side, write out all the advantages (or reasons) for the “open floor plan”: entertainment, airflow, parties and holiday celebrations etc.
Tip #3: Know How Much Home You Can Afford.Like it or not, there are two rules loan officers and lenders use to decide what size loan you can manage
The primary rule is the Payment to Income Ratio. This rule analyzes your net income, or your household income, as compared your prospective monthly loan payment.
To compute the “payment” part of the equation, the loan officer will take the home loan payment (principal + interest) and add the property tax and insurance premiums. Giving us the expression “PITI” (principal, interest, taxes, and insurance).
Typically, lenders will offer a loan with monthly payments approximating 28% of the monthly household income.
Before you get too excited, there is one more element to qualification that lenders look at.
It’s known as the Debt To Income Ratio. Debt includes ALL regularly scheduled finance payments other than your home loan installment (PITI). To get to this figure, the lender will consider…
- Your vehicle payments
- Your student loan payments
- Your credit card payments
- Any IRS liens or installments due
- Any additional payments and obligations you have (boat, vacation home, and so forth.)
Of course, there are finer points. Each home loan organization sets their own conditions on Debt To Income relationships, which is the reason it’s vital to locate a MOTIVATED LENDER.
If you use an extra few days to locate a lender that will save you $30,000 to $140,000 over its term, your time is WELL SPENT! Doing a little personal research can ultimately save you tens of thousands of dollars over the life of the mortgage.