Ensure Buying a Home that Remains Affordable
The number of foreclosures currently on the market begs the question
“What happened?” Certainly no one sets out to purchase a home, get
behind on the payments and then losing it to foreclosure. A number of
different things can happen including the loss of a job, serious illness
or some other emergency that makes it difficult to keep up with the
payments. Another increasing problem that can lead to foreclosure;
however, is a home that suddenly becomes unaffordable. How does that
happen?
Imagine for a moment that you are considering the purchase of a large
home. It has enough bedrooms and even space to spare. You have
anticipated the idea of purchasing a larger home for your family and now
that relatively low interest rates and homebuilder discounts have made
the idea a reality, you can’t wait to move into that big new home.
At first glance the mortgage payments seem well within your budget. You
have no problem qualifying for the mortgage. You even have the down
payment taken care of as well as the closing costs. Everything looks
rosy.
That is, until you have to face the reality of actually living in the
house and maintaining it.
Most homeowners have a narrow focus when purchasing a home. They tend to
focus solely on the mortgage payment and little else. The reality is
that purchasing a home and accepting the responsibility of that home is
part of a much larger financial picture. They fail to take into
consideration the true ‘operating cost’ of the home.
One of the first things you should consider when looking at a particular
house is how much it will cost for you to commute from the house to your
work. Far too many buyers get so caught up in the idea of the house they
fail to think about how far the house is from their work. Considering
the rising cost of gasoline today, this is a very real consideration.
Whenever possible it is best to look for a home that is near your place
or work or at least near the place of work for one partner in a dual
income household. Another option would be to find a home that will allow
at least one of you to travel to work by mass transit. This will allow
you to pare your transportation down to one vehicle and save quite a bit
in terms of transportation.
It is also important to take into consideration the costs for utilities
of the home you are considering. Like everything else, heating and
cooling costs have gone up. To make sure you have a clear picture of
what to expect, be sure to ask the current owners to provide you with at
least two years worth of utility bills for the home. Look for trends and
remember that utility prices will probably go up before they go down.
Maintenance and upkeep costs should also be considered. For new homes
you can generally expect that maintenance and repair costs will be quite
low during the first five to ten yeas. If you purchase an older home;
however, the costs to maintain the home are generally going to be
higher. Also, the larger the home, the more it costs to maintain it.
Not sure how much to expect in terms of maintenance? Spring for a home
inspection and have the inspector go over the home thoroughly.
You should also take into consideration other costs such as homeowner
association fees. Make sure you obtain detailed information regarding
any monthly management fees that may relate to the property. As with
utility bills, you should ask for historical records of the fees to see
if there have been increases lately. If so, you can generally expect
that trend will continue.
Make sure as well that you give careful consideration to the type of
mortgage that you obtain for the property. While an adjustable mortgage
very well may provide you with lower interest rates now; there is the
distinct possibility that those rates could increase down the road. You
do not want to find yourself in a situation where your mortgage rate has
ballooned out of control. In most cases, especially if you plan to stay
in the home for a long period of time, it is best to go ahead and get a
fixed rate mortgage that is slightly higher and have the assurance that
you will not be facing higher monthly mortgage payments later.
By taking the hidden costs of buying a home into consideration, you will
be better prepared to budget accordingly and make sure you really can
afford that dream home.
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