How to prepare for the realities of realty
There are few bigger commitments in life than buying a home. It’s exciting, it’s intimidating, and it’s also one thing above all others: a learning experience. Becoming a homeowner provides the kind of hindsight that makes many of us wish we had known more going in.2016’s figures for Florida saw typical monthly rental costs at $1695 versus mortgage at $1297 per month. With ever-increasing rents, the option of making that leap to a mortgage is becoming more attractive.
For those planning to buy their home, being savvy with savings is always the safest bet. Here are our preparation pointers on how you can claim the home advantage.
1. Prepare for the down payment
The top tip here? It’s never too early to start saving. Start a savings account of some kind to get the ball rolling. If you have your eye on a home, be sure to find out how much money you will have to pay upfront to secure the mortgage. The minimum hovers around 5% of the total cost of the home, ranging on up to 20%.
The more you’re able to pay the more confident your mortgage provider will feel. The less you’re able to pay the more likely it is that you’ll also have to fork out for private mortgage insurance (PMI); a payment designed to cover the lender in the event of you failing to make your payments.
The amount you have to pay every month on your mortgage will likely be lowered in relation to how much you provided as a down payment. So, while it may sting to lay down every dollar you can at the outset, it will ease your monthly costs down the line. If you’re wondering how much you might need to pay you can check out this handy down payment calculator.
2. Buy small, save big
By far the simplest of all the tips is to set your sights on a property that’s big enough for your needs and small enough for your wallet. We all have our dream home in mind, but overreaching yourself financially will turn a larger home into a big headache. Consider a property that serves your purposes rather than one that ticks every box. Not only will the mortgage payments be lower with a smaller home, it will cost less to decorate and maintain (not to mention reduce utility costs) over time.
3. Be the boss of your budget
Vigilant monitoring of your income and expenditures across every area of your life is a vital step in your saving strategy. You can’t save unless you know the destination of every dollar. Once you’re on top of this you will have a far better view of your position and maximize your ability to form a long-term plan. There are a wide variety of options available to monitor your personal finances and here are a few of the best.
You don’t have to cut back so severely on personal luxuries that you end up unhappy – but weigh up any material purchases in light of saving for your home. Every item you pass over means another little investment in your house. And any time you have a little cash hanging around and there’s nothing, in particular, you want to do with it, consider putting that in the mortgage pot.
4. Shop around
If you’re lucky, you’ll see your ideal home on the market and fall in love with it. If you’re unlucky, you’ll see your ideal home on the market and fall in love with it. Yes, you read that correctly. It can be a mixed blessing when you’re so impressed with a house that it seems as if there are no other properties in the world.
We recommend you don’t hurry the process of making your final selection. Take a long look around until you can honestly say you’ve made the right choice.
5. Downsize now to upsize later
You’re committed to saving up and buying a home, but what if you still have monthly rent taking a chunk out of your paycheck? How about moving to a more affordable rental spot to help your savings program? This tip isn’t for everyone, of course, but if you’ve done the math and you could stand paying a little rent somewhere else, consider living a little smaller today to speed up a bigger move tomorrow.
Even more ideally: can you find a new rental closer to the area you’d like to move into? This can help you get a feel for the people and the places where you’d be putting down new roots. If it’s not to your liking, you could be saving yourself from committing to greater expenses in the wrong place.
6. Keep an eye on your closing costs
You’ve settled the down payment and your monthly mortgage is about to begin. Everything is paid for now but the decorating, right? Not quite! There are further costs that often come as a shock for new buyers. If you decide to follow our earlier tip and buy a smaller property you could be saving on closing costs right out of the gate. A smaller property also means a shorter walk around for a home inspector.
A home inspector will check out the condition of your home, but not the value. The cost here tends to average between $200 and $500, so while that’s not as intimidating as a mortgage down payment it’s still worth keeping that figure in mind. It also never hurts to give the place a once over yourself for anything that might not be to your liking.
Other costs like insurance and attorney fees can rack up at closing too. The best money-saving secret is to make sure no secrets exist, so here’s a sample of what to expect to avoid nasty surprises.
7. Don’t be afraid to negotiate on the home price
Being a first-time buyer may make you feel like an amateur who has to do everything by the book for fear of upsetting the deal. The truth is you might be surprised how much you can save by haggling a little on the price. It’s more than common for a home to sell for under the asking price, and that’s more money saved for the other things on your list. A realtor can help with this negotiation, of course.
8. Have a cash cushion
This is failsafe advice for every walk of life but doubly so for homeowners. Make sure you haven’t drained your finances with the costs mentioned above. Having backup funds on standby when all is said and done will give you peace of mind if the roof starts leaking.
Nothing beats having the right team on your side when buying your home. When you’re ready, we’d love to help. Dante Disabato has been helping customers find homes in Southwest Florida for over years. Let him put that experience and market knowledge to work for you. Call us at 239 537 5351 or get in touch with your questions here.