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How long do you plan to live in the home?
If you purchase your home in The Woodlands or Magnolia and after a short time after purchase, you get a job transfer or decide to move you may end up paying money in order to sell it. The value of your home in The Woodlands or Magnolia may not have appreciated enough to cover the costs that you paid to buy the home and the costs that it would take you to sell your home.
The length of time that it will take to cover those costs depends on many economic factors in our area. Over the last 10 years, our market has seen an average increase in home values of 2-3%. In this case, you should plan to stay in your home at least 3-4 years to cover both your buying and selling costs associated with each transaction. If The Woodlands and Magnolia real estate markets continue to prosper as we have recently, you could end up with positive equity just after a short time in the home. Remember, the opposite is true if our market turns south and you could end up owing more than the home is worth. It is important to remember, Location, Location, Location.
How long will the home meet your needs?
What features are you looking for to satisfy your personal needs? What does that look like five years from now? Are you planning on kids? For example, a two-bedroom dwelling may be perfect for a young couple with no children. However, once you start a family, you could quickly outgrow the space. Therefore, I would consider a home with room to grow. Could the Texas basement be turned into a den and extra bedrooms? Could the formal living room be turned into a study? Having a written game plan of what you’ll need will help you find a home that will satisfy you for years to come.
Your financial health – your credit and home affordability?
Is now the right time financially for you to buy a home? How would you rate your financial health? How is your credit score? While you can always find a lender to lend you money, solid lenders are more skeptical if your credit history is not great. Generally, a couple of blemishes on a credit report may not keep you from getting a loan, however, you may not qualify for the best rates. Keep your credit score clean for the best home loan rates.
Some say that you should refrain from borrowing as much as you qualify for because it is wiser not to stretch your financial boundaries. The other school of thought says you should stretch to buy as much home as you can afford because with regular pay raises and increased earning potential, the big payment today will seem like less of a payment tomorrow. This is a decision only you can make. Are you in a position where you expect to make more money soon? Would you rather be conservative and fairly certain that you can make your payment without stretching financially? Make sure that whatever you do, it is within your comfort zone.
To determine how much home you can afford, talk to a lender who you trust, we have several that have proven to be honest and trustworthy that we love. Also, you can play with a mortgage calculator to help you find your comfort zone. Today’s lenders are only allowing your monthly housing costs to stay under 28% of your monthly income, and your total debt cannot exceed 36% of your income. Depending on your assets, credit history, job potential and other factors, lenders can push the ratios up to 40-60% or higher. While we’re not advocating you purchase a home utilizing the higher ratios, it’s important for you to know your options.
Where will the money for the transaction come from?
Today’s home buyers in The Woodlands and Magnolia areas will need some money for a down payment and closing costs. However, with today’s broad range of loan options, having a lot of money saved for a down payment is not always necessary – if you can prove that you are a good financial risk to a lender. Even if your credit has a few bumps, and you have managed to save 10-20% for a down payment, you will still appear to be a very good financial risk to a lender.
The ongoing costs of home ownership.
Maintenance, improvements, taxes, and insurance are all costs that are added to a monthly house payment. If these additional costs are a concern, you can make choices to lower or avoid these fees. Be sure to make your realtor and your lender aware of your desire to limit these costs.
If you are still unsure if you should buy a home after making these considerations, you may want to consult with an accountant or financial planner to help you assess how a home purchase fits into your overall financial goals.
The RockStar Realty Group with EXP Realty can help you during your first time home buying purchase. Call us today at 281-960-1900 to speak with a Real Estate Agent in The Woodlands who is on your side today.
eXp Realty – Texas RockStar Group | 281-960-1900