As we move to the beginning of the year, you may be considering taking the plunge into homeownership. This is a big decision! Among all the things to consider, finding the appropriate price point is the most important thing to do before looking at homes. This is a conversation we have with all our home buyers. We put together the following list of factors that go into deciding your ideal purchase price to help you start thinking about your decision.
1. Monthly payment
Your monthly payment is made up of a few different factors, including loan amount and interest rate, homeowner’s insurance, and real estate taxes. Depending on the property you’re considering, there may also be a condo or homeowners association fee (more on that later) included in the payment.
We recommend that you give serious consideration to the monthly payment that you and your family will find comfortable. No one wants to be in a situation where you can’t meet your payment. It is never a good thing to get your mortgage statement every month and panic! Once your loan officer has an idea of the payment range that is affordable and comfortable for you, they can derive the purchase price range that will ensure your payment falls within this range.
2. Cash to close
As we discussed in our previous piece, there is more to the purchase of a home than you may think. This “cash to close” figure will include both your down payment (if applicable) and closing costs. Like your monthly payment, once your loan officer is aware of the figure you want to spend at the time of sale, they will be able to derive a total budget that keeps you within this range.
Your loan officer can also help structure a mortgage that helps you get exactly what you want, whether that is less cash at close, a higher down payment to remove mortgage insurance, or spending more up front to reduce your interest rate. These are all things to discuss with your loan officer.
3. Property type
With the prevalence of condominiums in the DMV, it is likely that you will see a condo or homeowner’s association fee attached to a property. This fee is added onto your monthly payment and could also mean an increase in closing costs (if this sounds strange, check out the section on capital contribution in our previous article). It is important to know if the homes you are planning to visit have any condo or association dues applied so that you can understand and be comfortable with the full monthly cost of owning that home. We all know that homes are moving quickly and the more prepared you can be in advance, the more likely you are to get the home you want!
This underscores the importance of communicating with your agent and lender so that they know your cap, if you have one, on additional fees to be added to your monthly payment. You don’t want any disappointment once you start to fall in love with potential homes.
4. You have already found your dream home!
We certainly have customers that come in the door having already found a home that they love and are ready to buy. Assuming everyone is comfortable with the numbers it’s just a matter of getting qualified!
As always, it is important to communicate with your agent and lender throughout the process. Everyone must have all the information to be able to work together to ensure that you are looking at the right potential homes and that you have clear expectations. We don’t want there to be too many surprises!
Be sure that you know the numbers in and out! That way, when you find your dream home, you are ready to make an offer.
Please consider giving us a call to begin the conversation about homeownership in 2018!
