There is a lot of pressure for millennial buyers to enter the real estate market, and some seem to be responding. These buyers finally have the well-paying jobs they need to save for a down payment on a home. The trouble is that rates are rising, and some of these people might be tempted to seal a deal they can’t afford. Before you become one of them, read this valuable advice from an industry insider with more than 20 years of experience in the real estate industry.
What’s the Whole Cost?
Throughout the home buying process, you’ll hear a lot of figures thrown around with regards to what you can afford. The bank might pre-approve you for one amount based on your income and bills, while they quote you a different amount for the house payment you’ll have. That’s not the whole story. What about taxes and insurance? You should be able to calculate this with reasonable accuracy online, but your broker should have more accurate figures. Do not let this aspect slip by the wayside. Don’t be shy about hounding your broker for more information about how much you’ll pay each month to own this home.
Can You Save?
You’ve heard the six months rule, and odds are good that a substantial chunk of that emergency fund is going to go towards a down payment. So the next logical question is whether you’ll be able to recoup those losses over time. A good goal to shoot for is to save 20% of your income, but you will also get equity on the home you buy (if you made a good investment), so it’s ok miss that figure by a bit if you’re getting income in other ways.
What About Improvements?
When you’re searching for a home to purchase, one of the thoughts you should have in your head is how much you’ll need to fix to make the home livable. Ideally, the answer will be zero or close to zero. The less you need to spend on that first year, the better for your savings account. Don’t buy a project; buy a house that has projects you can get involved with.
Consider the Home Warranty
Most of the time, your agent will close the deal with a home warranty included. This is very important, and not something you want to just let fall to the wayside if you don’t need to. A home warranty has a few hang-ups involving what’s covered, but it can save you significant money on repairs to the home. The biggest worry most people have is the air conditioning system, so it’s worth it if you have an older HVAC in your home. The flipside is that the warranty may cover a component before the full replacement, so never hold one thinking you’re going to be covered for a full replacement if anything goes wrong. A tech will need to evaluate the situation first, before they can determine the proper course of action to fix it.
Kuba Jewgieniew founded Realty ONE Group in 2005, and has since grown the company into one of the most recognizable brands in America.