{"id":11100,"date":"2017-01-15T16:57:35","date_gmt":"2017-01-15T16:57:35","guid":{"rendered":"https:\/\/louisvillehomesblog.com\/?p=11100"},"modified":"2023-08-17T17:37:13","modified_gmt":"2023-08-17T17:37:13","slug":"can-afford-buy-home","status":"publish","type":"post","link":"https:\/\/trepryor.com\/blog\/can-afford-buy-home\/","title":{"rendered":"Can I Afford to Buy a Home?"},"content":{"rendered":"\n

People ask me all the time, “Can I afford to buy a home?” If that’s you, you’ve found the right post! Of course, everyone’s details are different.\u00a0<\/em>But, this article will provide you with the framework needed to answer this very question.<\/p>\n\n\n\n

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Putting more money down in the purchase of their home is more than just a smart decision, people have learned that it also brings peace of mind.<\/figcaption><\/figure>\n\n\n\n\n\n\n\n

In the world of real estate, one thing is certain… change. The market goes up! The market comes down.<\/p>\n\n\n\n

Then there are interest rates, changes in Federal regulations, and much more! For anyone new to this, it can be a daunting and confusing world.<\/p>\n\n\n\n

But help is available if you know where to look. Finding a trustworthy expert is perhaps the most important step<\/em> in the entire process!<\/p>\n\n\n\n

So, until you find yours, let me be that person for you as you get your feet wet and ultimately answer the question:<\/p>\n\n\n\n

Can I afford to buy a home?<\/h2>\n\n\n\n

Let’s do this!<\/p>\n\n\n\n

Should I even buy a home?<\/h3>\n\n\n\n

Before we ever start to determine if that cute Cape Cod might be worth a visit, let’s step back and tackle the integral question everyone should ask\u2014should I even buy a home?<\/p>\n\n\n\n

The answer to whether you<\/em> should buy or continue to rent is, \u201cIt depends.\u201d<\/p>\n\n\n\n

That’s really helpful, right?  Ok sorry, let me explain how to get a bette<\/em>r answer.<\/p>\n\n\n\n

I’m not a fan of everything that Trulia does, much of their listing data has been found to be inaccurate, but their site does have its uses. One thing I do like is their Rent vs. Buy tool. For the cities surveyed, it compares rental prices with home sale prices to help determine if it’s more affordable to buy or rent. Simple, huh?<\/p>\n\n\n\n

If it turns out that buying is more affordable for you, we cross that hurdle and move forward. The next important task for anyone considering a home purchase is saving up a down payment and closing costs money. Not fun, but absolutely necessary.<\/p>\n\n\n\n

The more you save, the more you’ll save<\/em>.<\/h3>\n\n\n\n

First-time homebuyers are finding it tougher and tougher to get financing. From a recent NBC news piece:<\/p>\n\n\n\n

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\u201cFinancing of first-time homebuyers with low down payments threatens to become a significant problem in the U.S. housing market,\u201d wrote Thomas Popik, research director for Campbell Surveys. \u201cFifty percent of first-time homebuyers use FHA financing, but FHA insurance premiums are increasing and underwriting is becoming more strict. Private mortgage insurance has started to fill the gap, but the long-term status of private mortgage insurance is in question pending the publication of the Qualified Residential Mortgage regulation resulting from Dodd-Frank.\u201d<\/p>\n<\/blockquote>\n\n\n\n

In previous years, the government put forth incentives to help first-time home buyers with their largest hurdle\u2014down payment funds. The problem is… that the tax rebate is expired.<\/p>\n\n\n\n

We’re back to saving money. So, how much do you need to save?<\/p>\n\n\n\n

Gone are the days of zero down. When your local real estate expert puts you in touch with a reputable loan specialist, you’ll find there a number of programs that can help you buy a home with as little as 3% down<\/strong>.<\/p>\n\n\n\n

But know this, the more you put down the better<\/em>. Not only because it reduces the amount of money that you are financing, but also because it means you’re closer to the goal of 20% equity in your property.<\/p>\n\n\n\n

Why is 20% equity important? Let me tell you!<\/p>\n\n\n\n

Once you have 20% equity in your home, whether you paid that money at closing as a down payment or have done so little by little over time, you’ll no longer be required to pay Private Mortgage Insurance (PMI)<\/a>. Say, “Sayonara!” to PMI and you’re well on your way to building a more solid investment<\/p>\n\n\n\n

In addition to your down payment, you’ll also need to pay closing costs. Closing costs fall into two categories.<\/p>\n\n\n\n

The first category of closing costs is one-time only. Pay them on the closing day and you’ll never pay them again. These are things like attorney’s fees, title examinations, transfer taxes, and the like. You might also pay points<\/strong> in order to have a lower interest rate on your loan. Speak with your loan specialist at the very start of the process to identify which loan product is best for your<\/em> situation.<\/p>\n\n\n\n

The other category of closing costs is actually pre-paid costs<\/em>. Regulations require that homeowners pay a minimum amount into their property tax<\/strong> and homeowner’s insurance<\/strong> “buckets” so that those monies are available when these bills come due.<\/p>\n\n\n\n

Paying this money into an escrow account at closing may seem like a tough pill to swallow but it’s required. As long as you understand that this money is actually being saved for a future bill, it’s much easier to take.<\/p>\n\n\n\n

Additional factors in your decision<\/h3>\n\n\n\n

One aspect of buying a home that we haven\u2019t touched on yet is time<\/strong>. This is actually critical to our decision-making process.<\/p>\n\n\n\n

There are a number of “Rent vs. Buy” calculators on the Internet. There is this fairly straight-forward one over on Realtor.com<\/a>. Then a more complex one New York Times<\/a>.<\/p>\n\n\n\n

If you live here in Louisville, Kentucky here are some numbers to help you fill in the blanks in these calculators.<\/p>\n\n\n\n