By: Sandy Robertson, Divisional Sales Executive, Bank of America Special to the Boca and Delray newspapers
- Should I buy a home?
Whether you’re a first-time or experienced homebuyer, it’s important to get a full picture of your finances. To assess your financial capabilities, think about how much money you have available to make your down payment. Then figure out how much you can reasonably pay each month for your mortgage, taxes insurance and private mortgage insurance. This number will be the size of the check you will write each month as your mortgage payment, and it will give you an idea of how large a loan you can support.
Once you’ve gotten a general idea of what monthly payment fits your budget, talk with your
lender, who can help you translate that payment into a realistic mortgage amount.
- How can I decide whether the home I’m looking at is within my budget?
When it comes to buying and owning a home, you’ll be responsible for more than just the down payment and monthly mortgage sum. You’ll also need to factor in closing costs, homeowner’s insurance, utilities, property taxes, ongoing maintenance costs and perhaps association fees.
- What are some current market trends that I should keep in mind?
The current housing market is very strong, especially in Florida, and I expect it to stay strong. Mortgage rates are still very low, and in every rate environment, people continue to have home financing needs. People will continue to buy homes, but history also shows us that as rates rise, more homeowners consider home equity lines of credit (HELOC) when they want to access the equity in their homes. Many clients are remodeling or renovating their homes to reflect their current lifestyle needs instead of finding a new place to live. Another popular trend we’re seeing is using HELOCs to finance energy-efficient home improvements.
- What are some advantages of owning a home instead of renting?
Rising rental rates have led more people to look at the economics of buying versus renting. Buyers are feeling more confident about homeownership because home values are stabilizing, and increasing in many places, and the job market is relatively solid.
Studies show that on average homebuyers break even on a home purchase in less than two years compared to renting the same home. Owning a home offers the chance to increase personal wealth and build equity. More and more millennials are focused on this, with our new Bank of America Homebuyer Insights Report showing that 86 percent of millennial homeowners believe buying is more affordable than renting.
Among being the boss of your own space, other commonly cited benefits of owning versus
renting include the federal tax breaks available for homeowners who have a mortgage and the
opportunity to draw on your home equity, should you need the cash. Many homeowners feel
secure knowing they have a financial cushion in their home with the availability of a HELOC.
Buying a home is a big decision—one of the biggest many will make in their lives. It’s important to anticipate the impact on your finances, making sure your monthly payments are sustainable for today and down the road. And ask yourself how saving for and buying a home aligns with your other long-term financial objectives.
- What are some extra costs I should budget for when buying a home?
To fully understand overall costs of owning a home, it is a good idea to get a handle on the secondary costs related to your housing choice. Different homes have significantly different implications for your day-to-day costs. For example:
- Home inspections can cost a few hundred dollars, and real estate professionals frequently recommend them to ensure buyers understand any necessary repairs.
- Any home needs maintenance. From painting to appliance repairs and replacement, these non-fixed expenses can add up to thousands of dollars. Many people find it prudent to budget annually to build reserves for these expenses, so that when they happen, they are not blowing their budget or dipping into savings.
- Renovation is a much bigger effort than maintenance. If you think you’ll need an updated kitchen or a new bathroom, budget immediately for it. Most buyers will need to pay for furniture movers or moving trucks, but renters may need temporary housing if they have to move out of their apartment by month end or before their new loan closes.
- Furnishing a new home, especially a newly constructed home, may result in unplanned costs. Most homes do not come with a refrigerator, washing machine and dryer.