If your first thought when seeing a new listing for sale is, “I wonder what the price is?”, you’re doing it wrong, asking the wrong question!
Too often prospective purchasers have a certain price range in their minds not giving any thought to the monthly costs. Whether you live in the high cost areas of Vienna and Mclean in Fairfax County or the more affordable areas in the rolling hills of Blacksburg, Lynchburg or Harrisonburg, Virginia, buyers will look through the open house notices and pick a few in the price range in which they think they’re interested.
They then begin to discuss how much they have to invest for down payment and closing costs, the type of loan they might be able to get approved for and the monthly costs for that particular loan and house. After you’ve found the house?
You Have it Backwards!
When you’re buying a home, it’s much more sensible to search for homes by cost, not by price. Price is merely a number hung on the house, a sticker number if you will. It is much more preferable to consider a property based on what it will cost you each month. That is what you will have to write a check for, not the list price.
You don’t want to overpay. More importantly don’t overspend!
In brief here are a few thoughts and items to consider:
1.) Start with a monthly housing budget. Fit the home to your budget, not your budget to the home. Understand how moving money around at the last moment can create problems.
2.) Know how much you have for your initial investment such as down payment and closings costs.
3.) Review your current credit report and make sure the information is accurate.
4.) Make an assumption about the length of time you expect to be in this particular property or how long it will be before your financial profile changes such as retirement or some employment related issue (length of contract).
5.) Have your mortgage professional run your information through the automated underwriting system (AUS). This will tell you what you can qualify for and where the potential problems are. At the same time a pricing engine can give you reliable pricing based on your credit score, loan-to-value, and other assorted factors.
Affordable Mortgage Rates Matter!
One of the main considerations for your monthly cost of housing will be the mortgage rate that you are eligible for when “locking” your particular loan. While low prices of homes increases affordability nothing makes the monthly cost lower like lower mortgage rates.
Right now, we are in a falling rate environment and nothing could be more helpful for keeping your monthly housing costs as low as possible.
Remember, construct a budget and then focus on monthly costs, not price. You will end up making a better decision and will be able to sleep soundly knowing you did.
Photo by woodleywonderworks