Articles Tagged "budget"

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December
18

Whether you've sold a home or not, you're likely familiar with some common home-selling tips or pieces of advice that you've been told or read in some article. You may even believe some of them! Even if delivered with the best intentions, the fact is a lot of the most common home-selling tropes are myths, and we're here to play the role of real estate myth busters. Here are eight home-selling myths you shouldn't believe.

The Myth: My house will sell in the first week!

The Truth: Your home may very well sell in the first week! We're currently in a seller's market, which means there's more demand than there are homes for sale. So if you were to list today, there actually is a good chance your home would sell very quickly.

However, that's only true when the market favors sellers. In other times, selling in the first week just isn't likely. Having lived in your own home for years, you've naturally developed a strong emotional connection to it. Unfortunately, not everyone else has the same connection, and it might take time to find someone who vibes with your house the same way you do.

The Myth: These huge renovations will pay big dividends in the sale!

The Truth: So you've poured thousands of dollars into a remade kitchen or a high-class bathroom in hopes that it will increase your home's value. On a very technical level, they may have. But it doesn't necessarily mean your house will sell at a higher price. The unfortunate truth is that depending on what you spent, you may not even make it back in the sale. Everyone's taste is different, so sweeping upgrades may not gel with potential buyers. Instead, talk to your agent about which upgrades might pay off. You can also take notice of other homes in the area and see what they're doing.

The Myth: My home should have a high asking price to leave room for negotiation!

The Truth: Unless you find a buyer who is head-over-heels smitten with your home, the only thing a high asking price will get you is a price change after a few weeks. Instead of creating room for negotiation, you're pushing away serious buyers who will balk at the exorbitant asking price. Instead, trust your agent to set an appropriate listing price based on the market, your home's value, and other factors.

The Myth: I received my first offer really fast. I must have underpriced my home!

The Truth: Remember when we said it's unlikely your home will sell in the first week? Sometimes, it does happen – you might get a bite just days after hitting the market. Don't overthink it: you didn't underprice your house. If anything, you likely priced it perfectly, which is why you're attracting serious buyers so quickly.

The Myth: I'm not going to accept my first offer, because I'll likely get a better one down the road!

The Truth: A common thought when receiving an initial offer – especially if you deem it less than attractive – is to hold out for a better offer from someone else. Of course, if the first offer fits what you're looking for, then by all means accept it – you know what's best for you. Talk with your agent about evaluating the offer – is there room to negotiate to bring it closer to what you want?

But turning down an offer just because it's the first can have unforeseen consequences. For example, the longer your home stays on the market, the more questions buyers will begin to have. What's so wrong with those house that it hasn't sold yet? What am I not seeing? Suddenly that first offer you turned down doesn't look so bad.

The Myth: I don't need to depersonalize my home when selling!

The Truth: As we mentioned earlier, you likely have a strong emotional attachment to your home. It's full of personal memories that you'd never dream of hiding. But you really should when it comes time to prepare your home to sell. You want potential buyers to be able to envision themselves in the home. Let them imagine making their own emotional connection without the roadblock of your family photos lining the shelves.

The Myth: My house will sell itself!

The Truth: Lovely though it may be, your house is highly unlikely to sell on its own merits alone. A well-thought strategy goes into every home sale, including marketing, staging, studying the market, and so much more. Simply sticking a For Sale sign in your front yard isn't going to get the job done. That's why hiring a trusted real estate agent to assist you is paramount in selling.

The Myth: I'm going with the agent who values my house the most, because they'll get me the best return!

The Truth: Go with the agent who properly researches the local market and values your property fairly according to said market. That's who will give your home the best chance to sell.

May
15

Whether you're a first-timer or you've purchased a home before, there comes a pivotal point when considering a new home where you have to ask yourself: Are you actually ready to buy? At first the answer might seem simple, but it's not a mere yes or no. Multiple considerations should factor into your answer, from debt and income to down payments and closing costs. You're not going this alone, though. We've prepared this guide to help you make sure you truly are in a good position to buy. So, are you ready to buy a house? Read on to find out.

Do you know how much house you can afford?

As we mentioned in our home-buying budget guide, it's important to go into your home-shopping experience with a firm idea of how much you can afford on housing each month. Getting pre-approved for a mortgage loan can help, but it also doesn't mean you have to spend the full amount for which you get approved. Most personal finance experts recommend spending 30% or less of your monthly income on housing. However, remember that your monthly housing expenditures include more than just a mortgage payment. Utilities, property taxes, HOA fees, and more could add to the total, so you'll need to keep those in mind when preparing your budget.

What's your debt situation like?

Do you have outstanding credit card debt? What about student loan debt? Not only can debt leave a bad mark on your credit score (more on that below), it can also severely hamstring your efforts to save and pay for a new home. Beyond traditional debt, what about a car loan? Or perhaps a different kind of personal loan? Of course there are financial circumstances that are unavoidable (like medical bills), but they'll affect your home search all the same. If you still have a significant amount of debt to pay off, that should be your financial priority.

How's your credit score?

Your credit score will directly impact the terms of your mortgage. Generally speaking, a score of 740 or more will net you better rates. You should aim to pump up your score as much as possible before seeking mortgage approval.

Are you prepared for a possible down payment?

You don't necessarily need to prepare for the typical 20% down payment, especially if it's your first time – most first-time buyers put an average of 7% down. In fact, many loans and programs require even less. So the amount you spend on a down payment will vary, but it's still a payment for which you should prepare. The last thing you want when buying a home is a surprise.

Will you have enough money left after closing?

If you're saving up for a $1,000 TV, it makes sense to stop saving at $1,000. The same cannot be said for purchasing a house. If your bank account bottoms out after closing, you're in a bad spot. You'll want to have an emergency fund that can keep you afloat for a few months. It's also a great idea to save up enough to cover your housing costs for at least six months. Beyond emergency planning, there will be things you have to spend money on in your home. From repairs to buying those random items you didn't think of before, you'll continue to pour money into your house after closing. Prepare accordingly.

What's your future look like?

We're not asking you to predict the future (but if you can, we'd love to know). Rather, where do you see yourself in five years? If you're uncertain about your current job or don't plan on staying in the area for a couple years, you probably aren't ready to leap into a new home. Buying a house is a major investment, and one that's better done on top of firmly planted roots. Once you've found security in a city and job you love, you'll be ready to start shopping.

February
12

So you're ready to buy your first home. Great! Home ownership is a unique gift, one that will continue to give back to you in time if you treat it right. As such, however, it's a major investment that can only come from careful planning, dutiful research, and a disciplined budget. Completing such a large purchase may seem daunting, but we're here to show you how to budget for your first home.

Plan Ahead

Saving for a house isn't the same as saving for a new couch or even a new car. You'll need as much preparation as you can get, so the sooner you start looking, the better. Have a look at homes for sale in areas you're interested in as early as a couple years before you're ready to buy to get an idea of the price range. In addition to pricing, browsing early can help you determine your priorities. How big of a house do you want? Is location super important? Are you adamant on a pool even if it costs more? Figuring out your must-haves will also help you determine how much you could potentially spend.

Set a Budget and Don't Budge from It

Once you have a general idea of what you're looking for in a home, you can start setting up a proper home-buying budget. Assuming you don't already maintain a budget, a good starting point is to add up all your monthly take-home income and subtract from that total all your monthly expenses. Let's say your monthly take-home income is $6,000. Your non-housing monthly expenses come out to $3,000, leaving you with $3,000 each month. However, it would be a folly to use $3,000 as a measuring stick for how much home you can afford. Generally, you should aim to keep your housing costs at 25% of your monthly take-home income. In the above example, you'd want to keep your mortgage payments at $1,500, give or take a few hundred dollars.

Consider the Additional Costs

For most renters, rent and utility payments are the only recurring housing costs each month. However, when you purchase a house, you'll have to consider additional costs on top of your monthly mortgage payment. Depending on the condition of the home you're purchasing, you may need money for repairs or renovations.

A maintenance fund is another good idea – even routine fixes can pile up when you no longer have a maintenance crew on-staff to handle them for free. Then there are HOA fees, property taxes, homeowner's insurance, and more. Even utilities bear considering, as houses typically cost more to heat and cool than apartments.

Depending on the type of home you purchase as well as the location, some of these fees may not apply to you. But rest assured many of them will, so it's vital you weigh these additional costs when coming up with your monthly housing budget.

Get Down with the Down Payment

And so we arrive at the dreaded down payment. You've probably always heard that you must be ready to drop anywhere from 10% to 20% as an upfront down payment. Allow us to break that myth for you. While some people may still want to complete a large down payment, it is absolutely not vital to purchase a home. In fact, the average first-time buyer only puts 7% down, and many loans and programs available to first-time buyers require even less than that.

As with most components of your home-buying budget, what you choose to put down will depend on your situation. You may find it advantageous to make a hefty down payment if your income isn't great but you have a lot saved up, as this could lower your mortgage payments and help you avoid private mortgage insurance. But don't let the myth of a mandatory 20% down payment scare you away from home ownership.

Get Pre-Approved

Unless you hit the lottery or strike rich from an oil deposit, you'll likely pay for your first home with a mortgage loan. Getting pre-approved for a loan from a trusted lender will set the bar for how much home you can afford. However, what you can afford isn't the same as what you should buy.

You've Got This!

Even with this budgeting guide, buying your first home may still feel overwhelming. We understand! Just remember: countless people have done this before, and you can too.

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