Affordable Housing - What Can You Afford?
Topics: real estate, financial planning, home buying, mortgage, monthly budgeting, older adult relocation
Most home buyers do not know where to begin when determining how much house is affordable.Typical wisdom begins by looking at a debt (mortgage payment, credit card debt, car payments, etc.) to income ratio of no more than 40%. Based on a monthly family income of $4,000 per month, this means your total debt should not be more than $1,600 per month. According to a mortgage calculator found at www.cgi.money.cnn.com a family with this income could conservatively afford a monthly house payment of $780. This equates to a home price in the range of $80,000.
You have read the newspaper headlines. The current credit crises. A record number of homes in foreclosure. This is why it is even more important to ensure that you are in a strong position financially to purchase a home. By contacting your bank or a local lender you can determine the strength of your financial background.
Many current home owners having issues purchased homes with little or no down payment and interest only mortgages. This means that the payments made pay only interest and do not reduce the principal amount of the loan. While these loans made it easier for many people to purchase homes, many buyers in this situation are upside down, owing more on their homes than the current value of the home.
Other considerations include the length of time you can stay in your home. If you cannot commit to remaining in the home you purchase for at least three to four years, you will unlikely be able to recoup the transaction costs of buying and selling a home not to mention allowing enough time for the market to improve, allowing appreciation in the base price of your home.
Some individuals, particularly those in their fifties and sixties are choosing to sell a current home and downsize to a smaller home with a one level floor plan. Again, when making these plans consider how your long term income will support a mortgage after you retire. For those fortunate enough, monies made from the previous sale of a home may make the transition easier. Again, in this case, consider how long you will be able to stay in the home. Consider current and potential health issues to determine if a move to an independent living community may be a better choice than downsizing to a smaller home. There are many considerations that can be reviewed with a care navigator.
How ownership also comes with added responsibilities. You will need to budget for regular upkeep and home repairs. When buying a home, it is a good idea to purchase a home buyer warranty or request that the seller purchase this for you. The benefit of this is peace of mind that anything missed in inspection is covered by the policy. Normally for a deductible of $50 the policy will cover repair of electric, plumbing and heating systems. This type of policy can be renewed after the first year for an additional year.
In spite of the fact that many people believe they can save money by doing it on their own, an experienced realtor can guide you through the home buying process and actually save you money through negotiation and by representing you to ensure that the process goes smoothly. You also receive advice on making sure that you are purchasing a house in good condition in a neighborhood tat will be likely to increase in value. There are also many other small details like clear title, absence of liens or easements, and that any issues that come up in home inspection can be properly addressed.
Pamela D. Wilson, The Care Navigator, provides counseling, education and advocacy for famlies and older adults experiencing transitions in health care. Visit www.pameladwilson.com for information or call 303-810-1816. For real estate info related to this article visit www.homesam.com
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