Saturday, December 28, 2013

Saving for a home: Put your purchases in perspective

With the New Year approaching, there's a lot of talk about resolutions. Perhaps your New Year's Resolution is to buy a home in 2014, but how do you get there? You've been saving for what feels like forever, but the amount in that savings account is just not going to cut it. Fortunately, there are a lot of programs out there that can help you out. With an FHA loan for example, you can put down as little as 3.5% on your home. However, that's still a lot of money. Between the down payment, closing costs, and all of those little essentials you need when you move in, the amount of money you need can become daunting. So, you need a plan.

Start by making yourself a budget, and stick to it! Think about the big picture here. How important is it that you're able to buy a house? Can you give up going out to dinner three times a week for the next few months in order to save more? Can you forego buying those new shoes? Make yourself a budget that focuses on the essentials, but allows you a little bit of flexibility. You can't expect yourself to buy nothing and never eat at a restaurant for a whole year. You'll get frustrated and give up. That's why it's important to make a budget that's possible for you to stick with from the beginning. Some people have more self control than others, so think about what is possible for YOU to achieve. You'll still need to push yourself, or it'll take you years to save enough money. A temporary change in lifestyle can really pay off in the long run.

No, I'm not saying that you need to become a recluse and survive solely on ramen noodles. It can be surprising how much all those little purchases can add up though. Yeah, maybe that lunch was only $10, but $10 a day, is $50 in a work week, which adds up to $2,600 a year. That's just on lunches (and $10 is a pretty inexpensive lunch if you live in the NOVA/DC area)! Start packing your lunch, it'll save you loads of cash. 

When I was saving for a home, I'd often find myself wandering into a store, and I would inevitable find something that I just HAD TO HAVE. Only, I didn't really need it. It may sound crazy, but whenever this would happen, I would actually ask myself, "What do you want more: this outfit, or a new house?" I think you know the answer to that question. Was spending $100 on a new outfit really going to keep me from buying my house? No. But $100 on an outfit today, $50 on new shoes next week, another new outfit later, and pretty soon you've blown hundreds, if not THOUSANDS, on stuff you don't really need, and you are no closer to buying that house. Even though I'm no longer saving for a new house, I still ask myself that same question whenever I'm saving for something, whether it's a great vacation, new furniture, or whatever I set my sights on! Just remember: you can do anything if you put your mind to it!

Friday, December 6, 2013

Buying a home: Step 3 – Prioritize your "Must-Haves"

So you know what you can afford and you've narrowed down your prime location(s). What now? Well, here's where compromise really starts to come into play. Unless you have unlimited funds, which very few people do, you will not get everything you want in a house. There will have to be give and take. 

What's important to you? I find that the best way to work through the many things you want, to determine what you actually need, is to make a list. Write down everything that you would like to have in a house, and then start putting these things in order of priority. (You can probably cross stuff off while you're at it too... yeah, I'd like to have an elevator in my house, but it's probably not a necessity.) If you are buying a property on your own, then this should be fairly easy, as yours is the only opinion that really matters. However, if you're part of a couple, or buying jointly with another party, this can become much more challenging. I always recommend that you each make your own list. Do this completely independently of your partner, and then compare lists when you're both done. You may find that you are both on the same page for the most part... or maybe not. I've talked to some couples about their wish lists, only to find that she wants a low-maintenance condo in the city, but he wants a single family home in the suburbs with a big yard. Uh oh. 

All of these issues can be worked out with a little compromise. It's important to involve your agent at this point in the process as well. He/she will be able to help you weed through all of the things you want, to put your needs in perspective. Even after you come up with your "Must-Have" list, your agent may have to point out that you still won't be able to get all of those things in your desired location. It's important to look to your agent for advice, because he/she will be able to make suggestions as to where you can compromise to get most of what you're looking for.

Whatever you decide, just make sure to take a step back and look at the big picture. There are some things that can be changed about a property and some that can't. Even if you don't want to do any renovations, you shouldn't let a house that checks every other box pass you by because, let's say, it doesn't have granite counter tops. That's an easy fix. Better to go with that house than a house that has all the right finishes but is on a busy road or lacks that much-needed 3rd bedroom or the option for one. Just remember: paint, fixtures, and finishes are all easy changes to make, but you can't pick up a house and move it, and it's generally very difficult and expensive to make a house any bigger.

Just to get your minds in motion, here are what I consider to be the Top 10 things to consider for your wish list (Not necessarily in this order. That all depends on you!):

1. What location or locations are you willing to live in? (You should have already decided this in ‘Step 2’!)
2. What type of property do you want? (Single Family, Townhouse, Condo, etc.)
3. Do you want a house that's move-in-ready or fixer-upper?
4. How many bedrooms do you need to accommodate your family?
5. How many bathrooms do you need?
6. Do you want outdoor space? If so, what kind and how much?
7. What type of floor plan are you looking for? Traditional or Open Concept?
8. What do you need in the kitchen? (Cabinet space, appliances, etc.)
9. What kind of parking do you require? (Garage, assigned spaces, street)
10. What do you feel is an acceptable age for the home? (Looking for a new home? Or one with historical character?)

Friday, November 15, 2013

Buying a home: Step 2 – Choose a location

So in my last post, I mentioned that it was important to understand your means before you choose a location. You might be asking yourself, "why?" Well, it's simple really: some locations are more affordable than others. Until you know what you can really afford, you don't know if it's even possible to buy a house that's, let's say... 10 minutes from the city. 

There will always have to be a balance, a compromise, between your wish list and location. Even if location is your number one priority, it is still important to understand what you can afford and what that will buy you in your dream location. There's no point in falling in love with a 4 bed, 3 bath, single family home in Arlington, VA when  your budget will only get you a 2 bedroom condo in that location. Then the question becomes: do you buy the condo to be in your dream location, or do you move out from the city a bit to get more of what you're looking for? The choice is yours.

When it comes to picking a location, there many things to consider, such as lifestyle, distance from work, school district, amenities, etc. All of these things are important. If you like to be able to walk to shops and restaurants, then you probably don't want to buy a house in a rural area. Perhaps you don't want to be more than a 30 minute drive to work. (Keep in mind the times at which you will be driving when measuring this distance. If you work a 9-5 job in Northern VA or DC, a 30 minute drive may only be 10-15 miles.) 

Now, some of you may be thinking, "School district? Why is that important? I don't even have kids!" Well it's always important to think about the future, and I mean that in a few ways. Whether you have kids, want kids in the future, or you never want to have kids at all, it's still a good idea to consider the school district for one very good reason: RESALE. Maybe you never want to have kids, so you really don't care what school district your house is in, but particularly if you are buying a single family or townhouse, when you decide to sell your house, a large part of the population that you're marketing to will have kids or want kids. So if you buy a house in a good school district, it will be easier to sell and you will likely get a better return on your investment. This is not to say that if you buy a house in a "poor" or "less-than-ideal" school district, you will never be able to sell it. You just may not see as big of an increase in your property's value as you would in a more desirable area, or it may take longer to sell. 

Taking all of these things into consideration should help you narrow down your location. It's helpful at this part of the process to speak with a Realtor. Hopefully this is someone who you already know and trust or a Realtor that was referred to you by someone you know and trust. Your Realtor will be able to help you when choosing a location, especially if you're not set on somewhere specific. If you tell him/her what kind of location you are looking for, a good Realtor will be able to give you some suggestions. Keep an open mind and don't be afraid to look in an area that you're not as familiar with. You may fall in love with an area that you never expected! 

Just remember that you need to be happy with the location and not just the house. You can always make changes to your house (there are limits on this of course), but no matter what you do, you can't change the location. You don't want to find yourself saying, "This is the perfect house! If we could just pick it up and move it to another neighborhood...." 

Saturday, November 2, 2013

Buying a home: Step 1 – Understand your means

Buying a home can be very scary, especially if it’s your first time. That can be true for anything new you try! As with anything new, it’s important that you understand the process and plan ahead. The first step in the process of buying a home (whether it’s your first home or your tenth!) is to understand your means.

It’s very important to talk to a mortgage broker to understand a) IF you qualify to buy a home and b) what amount of money you qualify to borrow. However, just because you qualify for a certain amount, doesn’t mean you can actually afford the monthly payments! It all depends on your lifestyle. Do you like to travel? Do you go out to eat a lot? Are you a fashion fanatic? All of these things and more will impact how much you can afford when buying a home, unless you want to change your lifestyle completely. And who wants that? No one wants to be house-poor… right?

When talking to your lender, make sure to ask questions so that you understand what the payments will be at different price points. You may qualify for a $500,000 mortgage, but how much do you have to put down? What will the payments be? How much will the payment be on a $400,000 house? You get the point. Then go home and run the numbers. You have to decide if there’s any part of your current lifestyle that you’re willing to sacrifice to buy a home. Or maybe you won’t have to sacrifice anything, but you will need to prioritize so that you can understand what sort of monthly payment will be comfortable for you, without having to resort to eating ramen noodles for dinner every night.

Not all Mortgage brokers are the same. Make sure you speak with more than one and understand that the size of the bank or banks they represent might impact the size of the loan you qualify for and the rate you’re quoted. Bigger is NOT always better when it comes to banks. If you need help finding a good lender – feel free to reach out to me.

Sit down with your family and put a budget together. Decide how much you’re willing to pay per month, what that translates into for a 30 year mortgage, and stick with it!

PS – There’s a reason why Step 1 is ‘Understand your means’ and not ‘Choose a location’. Stay tuned.