4 questions you should always ask your mortgage lender – San Antonio Express-News
How much can I really afford?
Home buyers who seriously ask this question are showing they have a good attitude toward money. There is a big difference between the question of how much you can qualify to purchase and how much you can afford. There are mortgage program available to qualify you for a home mortgage payment of more than 35 percent of your net income. But experts recommend you purchase a home with a payment 25 percent or less of your take-home pay. In two-income families, this conservative approach allows a job loss without losing the ability to pay for the mortgage.
Carefully examine your spending habits, particularly if this is your first home. Even if you have been disciplined in saving for a down payment and paying rent on time, the new focus on your home can easily derail your enjoyment. Remember, as a homeowner, you will be responsible for costs beyond your monthly payment to the mortgage company.
What are the costs outside the mortgage payment?
As a homeowner, you are now responsible for maintenance and repair costs as well. If you have been renting in the past, these costs can be shocking. Make sure you have a reserve account set aside to properly take care of your home. Don’t go overboard with decorating and improving when you first move into the house. First, it is not a disciplined way to handle your finances. Second, it is better to dream of the future, with money in reserve, than to blow it all trying to get everything done immediately.
Can I save money if I buy a fixer-upper?
The short answer to the question is yes. But this strategy can become tragic very quickly too. One reason is fixing a home up is a relatively expensive endeavor. Even professional remodelers can underestimate the costs involved in repairing or updating a home.
If you do decide to buy a home needing work, select a home in the best possible neighborhood that appears to only need cosmetic updates. If everything is functioning properly when you move in, you might be able to live with ugly carpet or outdated kitchen appliances for a while. When you buy in the best neighborhood you can afford, you are more likely to see equity growth as your neighbor’s value affects your own home.
If you are considering a home needing fixing because you are short on money and the home needs immediate attention, the answer quickly flips to a resounding NO. Too many optimistic people have experienced disaster with a “money pit” swallowing up their savings and they are left with a totally unlivable and unmarketable property. It is a bad scenario.
Why should I buy instead of rent?
When you pay rent, your monthly check goes to a landlord and you are left with nothing more than a place to live for a short period of time. The landlord controls how you enjoy the property too. When values go up in the community, your rent gets bigger and all the additional profit belongs to someone else. When you own, you get both tangible and intangible enjoyment including the growth of your equity and sizable tax advantages.