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?)