Lisa Courtney's Blog
15 Wellesley AV, Pawtucket RI, 02860
Your own gut may be a great check when buying a house. You know if a deal feels right for you or not. Partner with a licensed realtor who holds herself to the highest ethical standards and you may never have to worry about being part of a kickback or a mortgage fraud scheme. You may get the best prices on each part of the home buying and home owning process.
Empower yourself when buying a house
That includes getting the best deal on your closing costs, mortgage insurance rates, property appraisal costs, title fees, homeowner's insurance rates and mortgage fees. However, unless you live in the house that you buy with this realtor until you decide not to own a house anymore, benefits of working with the above the board realtor will run out.
To truly gain while buying a house, you need to trust yourself. You need to learn the ins and outs of the mortgage process. This doesn't mean that you need to know as much as a real estate with an active license. But, to protect yourself against mortgage fraud and other disadvantages, it does mean that you should know about mortgage elements like:
- Real estate agent commissions and fees, including the average and competitive realtor commissions in areas that you are looking for a house in
- Homeowner's association fees and costs that go to embezzlers (This can happen if homeowner's association board members aren't keeping a watchful eye on balance sheets, payments and bank records.)
- Down payments (In addition to knowing what the average down payment percentage is, you should know how down payments will impact your monthly mortgage installments.)
- Home inspection fees (Again, find out what the average rate for home inspection fees are in the area where you want to buy a house.)
- Mortgage insurance costs (This costs is separate from homeowner's insurance.)
- Insurance to protect your house and land, including financial protection against natural and human caused damages.
- Fees associated with the mortgage application itself (Get clear about costs that you are responsible for paying that you won't be reimbursed.)
- Values of houses in the area that you want to move into (It doesn't hurt to run comparables on houses in the area yourself.)
Know what you're getting into when buying a house
These additional costs may not be directly associated with buying a house, but they will impact your ability to make your monthly mortgage payments. At the top of the list are utility costs. Electricity and running water aren't the only utilities you may be responsible for after you buy a house. Other utility and home related costs include sewage and trash pickup fees.
After you buy a house, you may also be required to pay for gas, telephone services, oil,cable television and Internet services. You'll also have to pay to maintain your home. Maintenance costs cover repairing appliances like the refrigerator,washing machine or air conditioner.
Make sure that you can pay these costs comfortably before you take on the responsibility of owning a house. It can keep you from falling behind in your mortgage payments. It can help you to sleep good at night.
When you narrow the numbers of houses that you're serious about buying, weather is probably the last thing that you think about. But, depending on where you buy a house, you could be inviting very hard weather conditions into your life. And you don't have to move to a coastal area to experience harsh weather.
Storms do more than damage your house
You don't have to live in Florida or along the New Jersey shore for serious weather storms like hurricanes and flooding to change the way that you and your family live. If you've ever had to vacate your house due to the threat of a weather storm, you know how quickly a storm can alter your best laid out plans.
Let the frequency of storms be high, occurring once a quarter or more, and you could be forced to store protective plywood, plastic window coverings, salt and shovels in your basement or garage. It might not take long to get into a cycle of covering windows and doors only to remove plastic and wood coverings a few days later.
This cycle alters your plans. It can also cause you to fear high winds and hard rains. For example, you could start to fear that a dark sky signals that a storm is going to rip through your house even if weather forecasters say that the area will experience no more than a heavy rain.
Understand what you get into when you buy a house in a stormy area
Some people have developed weather fears to the point where they order everyone in their house to turn off all electric appliances as soon as the sky grows dark during the daytime. These people may have experienced an electrical shock during a weather storm and convinced themselves that someone will always get electrocuted during a storm if appliances are left on.
Those are just a few fears that you could develop if you buy a house in an area that has a lot of damaging weather storms. As previously mentioned, there are also costs, including storm preparation and storm clean up and repair costs, associated with living in a house that's located in a high storm area.
Avoiding these costs and clean up headaches can be as simple as holding a conversation with your realtor. Make sure that you know which type of homeowner's insurance coverage you should get for the area that you buy a house in.
Homeowners insurance to deal with severe weather storms
Theft, fire and tornado damage might be included in general insurance packages. However, you may have to request coverage for earthquakes, floods, hurricanes, mudslides and hail damage. After you get the necessary homeowner's insurance coverage, you need to know how to travel in storms.
For example, you should know that it's not advisable to drive onto flooded streets, as even a slight dip in the road could cause water to rise, potentially trapping you in your vehicle. The fact that bridges freeze before flat roadways is another important point to remember.
Understand all costs that you could incur if you buy a house in an area that experiences tornadoes, earthquakes and excessive rain and flooding. Also, familiarize yourself with the amount of work that you will have to do to remove weather elements like snow and ice, excessive mud from mud slides and hail.
Allergies are another weather storm related condition that you need to educate yourself about. Buy a house in a heavily wooded area and your allergies could cause you to feel groggy, tired and listless for days. The same goes for houses located in areas where weather invites insects like mosquitoes and fruit flies.
When you get pre-approved for a mortgage, you may be excited to find out that you can afford a lot more house than you thought you could. Don’t be so fast, this is just what you can get a loan for. The bank doesn’t know a lot of factors about your finances. While you most likely had to provide a ton of income verification statements and information in order to get this ballpark figure, relying solely on the pre-approval number can put you in a bind when it comes to your finances. Your lender doesn’t know certain things like how much you spend on groceries or how much your cell phone bill is each month.
What Lenders Consider
Lenders look at the health of your credit history, how much income you have and how much debt you have. These are the big factors that tell your lender about how much house you can afford. Yet, your home lender is not your financial advisor and can’t help you with household expenses and the like. When thinking about what price range of home you really can afford, consider these factors beyond the bank:
Your Monthly Budget
Your spending habits will ultimately affect your ability to pay the monthly mortgage bill. If you’re spending all of your disposable income, then you may not be able to afford much at all beyond what you’re already paying for rent. You don’t want to stretch your finances so thin that you won’t be able to afford food!
Owning A Home Requires Additional Costs
Lenders do factor into their number the cost of homeowner’s insurance and property taxes, but don’t consider other things like utility bills, trash pickup and home repairs. All this can certainly add up when you’re a homeowner!
Your Savings Is Nonexistent
If you’re unable to save any money at all if you’re a homeowner, then you’ll be in trouble. You need money stashed away in case of unemployment or an emergency. You also may be planning for things like retirement and future costs like children’s education. For the initial purchase of a home, you’ll need upfront payments available for the down payment and closing costs. However, you’ll need some more savings beyond that for everything that life brings your way!
You Have Big Plans
Are you thinking of quitting your job and heading out to start your own business? Now may not be the best time to buy a new house. These changes could have a huge impact on your finances and leave you unable to pay your mortgage. Your lender won’t be asking about these plans, so you’ll need to know what the future holds (for the most part ) in order to keep your own finances secure.
The bottom line is that anything that could leave you financially stressed is not a good idea. Considering that buying a home is one of the biggest purchases you'll ever make, you want to be sure that you keep your finances in check during the purchase process.
Monthly mortgage payments for first time home buyers are generally lower than they are for repeat home buyers. As a first time home buyer, you could pay $1,200 or less to own a house. If you're a seasoned home buyer or have bought two or more houses, your monthly mortgage payments might hover around $1,400 a month or higher.
Using mortgage payment savings to invest in other areas of your life
The higher monthly mortgage payments could reflect income increases, job promotions and demands of a growing family. Yet, even with a higher salary, it's smart to lower the amount of mortgage you're responsible for. There are so many things that you can use the savings for. You could use money that you shave off your monthly mortgage payments to:
- Grow your retirement savings
- Invest in your or your children's education
- Fund the startup of your new business
- Pay off student loans, credit cards and other debts
- Cover the costs of home repairs, upgrades and general home maintenance
- Travel internationally
Practical steps to lower monthly mortgage payments
Saving on a mortgage can yield long term rewards. It also requires discipline. Five steps that you could take to lower your monthly mortgage payments are:
- Send in $100 or more above your required minimum monthly mortgage installment. For example, if your monthly mortgage is $1,426,send 1,526 or more. You may have to pay $100 or more a month for several months before you notice a drop in your principal. Therefore, if you take this approach, stick with it.
- Refinance your mortgage when rates drop. An example of this is if you purchased your house when interest rates were 8%. Should rates drop to 3.6%, your monthly mortgage payments could drop significantly. There are fees associated with refinancing a mortgage. Among these fees are the mortgage application fee, loan origination fee, home appraisal fee, closing costs and documentation fees. It's advisable to refinance only if you plan on keeping a house for several years.
- Rent out part of your house. If you're concerned about renters paying on time, rent to two people. Charge enough so that you can cover at least half of your rent with payments from one renter.
- Move your business to your home. Instead of paying a second mortgage for a separate business location, operate your business from within your house.
- Apply for a longer repayment term. Your overall principal won't drop, but your monthly mortgage payments should go down.
- Put a healthy down payment on your home. Check with your lender and ensure that the lender will let you forego mortgage insurance payments if you increase your down payment.
Life changes like job layoffs, new business startups and marriages and divorces could call for you to make lower monthly mortgage payments. Despite what you might think, you have options. One or more changes could keep you in your home. The extra money could also give you the finances to invest in other parts of you and your children's futures.