Top 5 Things First Time Homebuyers Need to Know
Are you considering purchasing a home of your own here in Katy? Here are a few important things that you'll need to keep in mind:
How Long You Plan to Live in the Home
If you purchase a Katy home and get a job transfer, or decide you need to move after only a couple of years, you could end up in the negative when it comes time to sell your home. The value of your home may not have appreciated fast enough to recover the costs you incurred when you purchased your home, much the less the costs you will incur again to sell the home.
The amount of time that it takes to cover all of these costs can vary widely depending on a number of economic factors. The Katy area, over the last four years, has averaged roughly 6.325% appreciation per year. In this situation, a home owner should expect to stay in their Katy home at least 2 - 3 years to recover all of their costs for buying and selling the home. Of course, these numbers are averages, and certain communities in the area perform much better, in which case, a shorter turn time could be expected.
How Long the Home Will Meet Your Needs
What features do you need in your home to support your current lifestyle? Do you think your lifestyle might change in say the next five years? A young married couple might be completely satisfied with midtown condominium right now, but what if they had children? What if regular nights out on the town are replaced with two children and good schools suddenly take priority over a hopping night scene. So you can see why it might be a good idea to consider a home that has room to grow. Could the study be converted into a fourth bedroom? Could the unfinished attic space become a gameroom? Planning for the future could save you thousands of dollars when you have a home that can satisfy your changing lifestyle for years to come.
Your Financial Picture
The big question... do you think you're ready to buy? How good are you at managing your expenses? Do you have dependable income, with long term documentation to back it up? Do you have a lot of debt that eats up a big chunk of that income? And what does your credit report look like? It's likely nearly anyone could FIND someone to lend them money, but reputable lenders want to see a strong financial picture to give you the best interest rates for your home. To take a more in depth look, check out Four Signs You're Ready to Buy elsewhere on our website.
One of the biggest mistakes we see buyers make is spending above their means. Buyers stretch every penny to afford the biggest, most lavish house they can, and then are house poor and our working merely to support their home. Reputable lenders will help you determine how much you can afford and what price range you should be searching in... this is why honest Realtors will always tell you the first step is to talk with a lender. A safe rule of thumb is to utilize the same income-to-expense ratios that lenders do. Typically, they want to see your housing expenses take up no more than 28% of your income, and total debt take up no more than 36%. Mortgage payments should ALWAYS be in your comfort zone.
How You'll Pay for the Transaction
Buyers can expect to need funds to close on a home. With the exception of USDA and Good Neighbor loans, at a bare minimum, a homebuyer could expect to need 3.5% of their purchase price for an FHA down payment. In addition, the homebuyer could expect to pay up to another 2% - 3% for closing costs, which typically include loan and title fees. Naturally, the more money homebuyers are able to bring to closing, the better the rates they should expect to be able to receive.
Ongoing Costs of Owning a Home
Keep in mind that your mortgage is only part of your ongoing housing costs when owning a home. You'll also be responsible for maintenance, improvements, taxes, insurance, and all utility bills. Most communities in the Katy area also have homeowners associations that charge annual assessments for common area maintenance items like community pools, public green space, street lighting, etc. It's critical that you keep these additional expenses in mind when shopping for a home. A good Realtor can help you find communities in which these expenses can be minimized.
Still have questions? Not sure you understand everything we've summarized here? We are more than happy to meet with you to discuss your options, and we'll even arrange to have a loan officer present to discuss finances with you if you so choose.