The FIRST STEP to purchasing a house is NOT to download all the home search apps you can find onto your smartphone and then start swiping through homes. JUST STOP IT! The first step is to actually find out what price range you should be looking for.
To borrow a phrase, “What’s in your wallet?” plays a vital role in what and where you will purchase a house. For instance, if you can only afford a payment of $2,500 per month, and you have 5% to put down on the mortgage, that pretty much dictates, determines, locks you in – on where you can choose to live and in what type of house you will be purchasing.
Thus – find out out your price range — THEN go shopping. Buyers who skip this step find themselves looking at homes way out of their price range, and then also find themselves disappointed that instead of the 4 bedroom, 3 bath house with a garage 2 miles from work – they can only afford the 3 bedroom, 2 bath townhouse about 20 miles from the metro station, from which they will now have to commute another 30 minutes on the subway. Shew! Sorry about that!
Once you talk with a lender, you’ll have a good grip on what it takes to budget yourself for the payment, which includes four to five components:
- Principle (the money you’re paying back on the money you borrowed).
- Interest (the money you’re paying to the lender for the cost of the money).
- Taxes (rolled into your payment, it is collected by the lender and then paid out on your behalf to the local jurisdiction in which you reside).
- Insurance (this is the hazard insurance on your home paid to your insurance company – this covers your home from fire, hail, brimstone, accidents, etc.).
One of the myths of home buying is that you must save up 20% or more of the purchase price to buy a house. Not true.
You can buy for as little as 0% down. Though the most common downpayment for first time buyers is about 6%, according to Attom Data Solutions, a group that tracks such things.
The programs available to purchase include, but are not limited to, the following:
- Conventional – requires anywhere from 3-20% downpayment
- FHA – requires 3.5%
- VHDA – used with FHA, and provides the 3.5% downpayment money, and in essence, creating a 0% downpayment program — for first time buyers.
- VA – the downpayment can be as low as 0%, for military veterans and active military.
About 20% of the homes in the Northern Virginia area use FHA and VA loan programs, which are programs insured by the government and require 3.5% downpayments (for FHA) and as low as 0% for VA (and you must also be a veteran or be in active military service)
Another 60-70% use conventional loans, and cash rounds it out.
To find out what you can afford to purchase, give me a call, or email me in the box below and then let’s talk it through, You may be closer to buying a home than you think!
Until next time…