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When it comes to buying a home, the most critical rule is fairly straightforward: don’t purchase a house you cannot afford. Of course, what constitutes affordable will vary from buyer to buyer.

No matter your budget, it’s likely a home will be one of the largest single purchases you will ever make. Therefore, it’s important to budget wisely and well in advance to guarantee you can afford the home you’ve always wanted without over-extending your finances.

These suggestions and best practices will help you begin the budgeting process as you prepare to invest in your future.

Have A Clear Understanding Of Your Finances

In order to even begin creating a budget, you need to have a clear understanding of your personal finances.

First, simply start by analyzing your total income. If you are purchasing a home with a spouse or partner, figure out your combined total income and how much you are willing to spend on your new house.

You should also tally all your monthly expenses. Factor in every detail—groceries, car payments, credit card bills, everything. You need to fully understand how much you spend each month. This way, you’ll know how much of your income is left over every month to dedicate towards your mortgage payment.

In order to fully understand how much home you can afford, take advantage of free, online affordability calculators. Zillow and Bank of America offer these tools to help you visualize your expected monthly payment.

Next, analyze how much you are spending on debt. If debt is taking up a significant portion of your income right now, you might want to hold off on purchasing a home, at least for a while.

When you apply for a mortgage loan, potential lenders will look at any outstanding debt you have incurred when deciding how much to lend you. If you have a significant amount of credit card debt, you are less likely to get a good deal from a mortgage lender.  

Keep in mind, buying a house is a massive investment. You need to make sure you are financially able to afford a new home.  

Follow The 25% Rule

Once you understand your finances, you can start the actual budgeting process.

Many finance experts recommend the 25% rule. This rule states that your mortgage payment should not be more than 25% of your gross income each month.

This is why understanding your finances is so important—you’ll be able to determine how much you can realistically afford to pay every month.

Again, you don’t want to over-extend yourself. If you’re worried about being able to afford your home, follow the 25% rule. This might mean that you need to look for a less expensive house than the one you have in mind.

But staying within a reasonable budget is vital in order to enjoy your new home without the stress of unrealistic expenses.

Remember The Down Payment And The Closing Costs

Generally, lenders want homebuyers to pay at least 20% of the purchase price in cash. While you can definitely put down a smaller amount and still get a good mortgage loan, the more you can pay for the down-payment, the less you’ll have to pay in interest.

If 20% is simply too much for you to afford, aim for around 10-15% as a down payment. According to the National Association of Realtors, the average U.S. homebuyer puts down just 12% when buying their first house.

There’s definitely some wiggle room when it comes to how much should spend on your down payment—but again, the more you can pay up front, the less you’ll pay in the future.

Also, it’s important to budget for closing costs. These can amount to between 2% and 5% of the purchase price. Don’t forget to add this figure to your budget. You don’t want to be surprised by extra expenses right before moving into your new home.

Plan For The Future

Finally, budget for the additional expenses that come with purchasing a house. Categories you’ll need to include in your budget are homeowners’ insurance, utilities, repairs, and maintenance costs, just to name a few.

Your dream home might seem affordable on paper, but if you haven’t budgeted for future expenses, you may need to look for a more affordable home.

Even the smartest budgets can get blown by unexpected costs, which is why you need to plan for more than just the mortgage price when establishing your budget.

Get Assistance Today

Creating a budget for your future home can be very overwhelming. If you feel like you’re in over your head, don’t worry. Real estate agent, Kim Clark, has years of experience under her belt and can help you formulate a realistic and affordable budget that fits your needs. Contact her today!

TL; DR

Buying a home can be a stressful process. Follow these steps and best practices to make your housing process as smooth as possible.

Before looking for a house, make sure you have a clear understanding of your finances. Check your credit score to guarantee you’ll be able to get a mortgage loan.

You’ll next need to set a realistic budget and find a lender. Do some online research to find the best possible lender for your needs.

It’s also important to get preapproved for a loan. This helps sellers realize you’re a serious purchaser.

Don’t set out to find your dream house. Create a list of priorities that you want in a future home. Find out what you absolutely need, and shop for your dream home based on those priorities.  

Once you’ve found a great house, make a smart offer. Get your realtor’s advice on what a realistic offer looks like for the home you’re purchasing.

Before moving in, make sure you get a home inspection and a home appraisal. Seriously, both of these processes will save you money in the long run.

Once you’ve completed these steps, you’re ready for the fun part—close on your home and move in! 

Buying a home is one of the most exciting phases in your life—it’s part of the American dream.

But moving into a new home has its challenges. Not only do you have to find a house you love in your price range, you also have the added responsibility of a massive investment.

But don’t worry. According to the Bank of America 2019 Homebuyer Insights Report, 93% of current homeowners say owning a home is worth the challenges it took to achieve.

Which means, you should pursue your dream of owning a home.

While you may be excited and anxious to get into a new house, you need to make sure you’re prepared to take this big step.

The following steps outline the various stages in buying a home and offer tips and tricks on how to make the home-buying process as smooth as possible.

If you’re currently in the market for a house or considering purchasing one in the near future, understanding these phases in their entirety can save you a lot of time and hassle and make your transition as seamless as possible.

Stage 1

Have A Clear Understanding Of Your Finances

Buying a house is a major investment. If you’ve only ever lived in an apartment before, there are many fees and expenses that come with buying a house, not to mention the multi-year mortgage.

Before you start seriously searching for your dream home, you need to have a good understanding of your financial situation. While a mortgage spreads out the costs of a house over several years, you will still need to pay some money up front to cover the down-payment and the closing costs.

The minimum down payment is ideally 20% of the purchase price.

Depending on what types of loans you qualify for, you may not have to pay this much for a down payment.

For example, if you have served in the United States military, you might qualify for a VA Loan, which comes with additional benefits, like not having to pay for a down payment.

Depending on your annual income, you may also qualify for a USDA loan. With this type of loan, you will also be exempt from making a down payment.

Find out whether you qualify for these types of loans before moving forward.

Aside from these exceptions, it’s a good idea pay about 20% on your down payment in order to save yourself from additional fees and higher interest rates. The larger your down payment, the lower your monthly mortgage bills will be, meaning you save money on interest in the long run.

When purchasing a home, you will also be required to pay for the closing cost. The closing cost is typically 3%-6% of the purchase price. However, the amount you pay in closing costs depends on the terms of your loan and the cost of taxes in your home’s location.

By the time you’re ready for closing, your lender will offer you a loan estimate document. This three-page form will describe the terms of your loan, so you know exactly what you’re paying for and how much you need to save.

But before you apply for a loan or receive your closing documents, you need to start saving. As mentioned previously, there are quite a few fees that incur when purchasing a house.

You need to make sure you are financially stable and ready to make this major investment. Start saving now so that when you’re ready to purchase your home, you are fully prepared and understand the costs involved.

Stage 2

Check Your Credit Score

Once you’ve begun the saving process and understand the state of your finances, you need to check your credit score. The importance of this stage cannot be overstated.

Any mortgage lender is going to take a detailed look at your credit score and financial history before agreeing to offer you a loan. The lender is looking to see if you have a stable track record when it comes to your financial record and making regular payments.

Lenders will only commit to loaning you an amount they’re comfortable with you taking responsibility for. If they don’t believe you are a responsible candidate, you will likely not get as good of a deal.

Did you forget to pay off a couple of credit cards? Unfortunately, this will negatively affect your credit score. If you have a history of late payments in your credit report, your lender is going to be less likely to offer you a loan with a good interest rate.

If you have a seriously questionable credit history, you could even jeopardize your chances of getting any loan at all. If you have a less-than-perfect credit history, you’ll want to beef up your credit score in order to acquire a decent home loan.

If you have a high credit score, you are more likely to secure a great interest rate on your loan.

Checking your credit score is easier than ever before. There are plenty of free online resources you can access. Checking your score will not affect your credit score, so make sure you check before you apply for a home loan.

Something to keep in mind, given the recent circumstances of our world, lenders are requiring higher credit scores than in previous years. Chase Bank now requires a 700-credit score and a 20 percent down payment in order to qualify for a home loan.

So, if your credit score is under 700, start building your credit now. Don’t waste your money by taking on a loan with extremely high interest rates—you will likely regret it in the future.

Stage 3

Set A Budget

Now that you’ve checked your credit score and have a good idea what your finances look like, you should start to figure out how much you’re willing to spend on a home.

Before you even speak with a mortgage lender, you need to have a budget in mind. The last thing you want to do is overextend your budget and settle on a price that you cannot realistically afford.

When setting a budget, make sure you calculate all additional costs you will incur, not just the sticker price of the house. There are quite a few short-term and long-term expenses you should budget for.

Here are some terms to keep in mind when creating your budget:

Principal—this is the money that you borrowed in order to purchase your home.

Interest—this is the fee that your lender charges you for borrowing their capital.

Taxes—Remember, purchasing a house means you’re now paying property taxes. Add in your property taxes when creating a working budget.

Insurance—you will also want to purchase home insurance in order to protect your house from potential damage.

Association fees—this is the money you owe the homeowner’s association. You will only pay this fee if your house is part of the homeowner’s association.

Closing costs—again, you will be responsible for the closing costs. Go ahead and add this number to your budget.

Additional expenses—homes require regular maintenance. Create some room in your budget for additional repairs down the road.

When creating a realistic budget for your new home, a good rule of thumb is the 28/36 rule.

This rule means when budgeting for a mortgage, make sure your maximum household expenses will not exceed 28 percent of your gross monthly income. Additionally, make sure your total household debt doesn’t exceed 36 percent of your gross monthly income.

Following this general rule will help guarantee you are not overextending your resources when purchasing a home.

Stage 4

Find A Lender

The next step in your home buying process is finding a lender.

According to the National Association of Realtors, 44% of homebuyers begin by looking at properties, while 17% start by directly talking to a real estate agent.

In reality, it is in your best interest to find a lender before you speak with a real estate agent. Why? Because you need to first understand how much you’re going to spend on a house before looking for your dream home.

You should also shop around for a lender before choosing one. Different lenders offer different interest rates and terms on loans.

According to research from Freddie Mac, the average borrower could save $1,500 by getting one extra rate quote when applying for their mortgage.

Less than half of borrowers shop around for rates when applying for a mortgage loan, and they are losing money by not doing so.

Homebuying can be overwhelming. Maybe you don’t feel equipped to research the rates and fees different lenders are offering.

In order to combat unnecessary stress, start your research early. Don’t wait until the last minute in your home-buying process to start researching different lender’s rates. Mortgage rates vary rapidly so staying on top of the trends is a must.

Once you’ve spent time shopping for lenders and understanding the different rates and fees offered, you will feel more equipped in finding a loan that fits your financial situation.

Stage 5

Get Preapproved For A Loan

Once you’ve found your lender, it’s time to get preapproved for a loan. You will have a much simpler time in the home buying process if you obtain this preapproval.

Contrary to popular opinion, getting prequalified for a loan does not ensure that you’ll actually be able to get a loan.

Prequalification is a good indication of creditworthiness, but it is not a definitive term.

In order to get preapproved for a loan, you must complete an official mortgage application and provide your lender with all the documentation necessary to perform a background check on your finances and credit score.

Your lender can then preapprove you for a specified mortgage amount. This will give you a clear picture on the interest rate you’ll be charged for your loan.

There are many benefits to getting preapproved for a loan.

For one, you are guaranteed that you’ll be able to obtain a loan, as long as your financial state doesn’t change dramatically.

Preapproval also shows to sellers that you are serious about buying their house and able to financially afford it. You will then be able to move quickly once you’ve found your perfect house and be able to close in a timely manner.

Prequalifying for a loan still shows a level of commitment and financial reliability, but it does not offer the same level of protection and guarantee that getting preapproved on your loan does.

Make sure you are preapproved for a loan before continuing with the home buying process.

Stage 6

Choose A Real Estate Agent

One of the best ways to make the housing process simple is to find a good real estate agent. It is definitely possible to purchase a home without using a real estate agent. But this can actually make the process much more stressful for you.

So how do you find this perfect real estate agent?

To start, you can compare real estate agents online. Simply do a quick name search for agents you’ve found and read the online reviews left by previous buyers. The next thing you can do is interview the real estate agents you’ve discovered with great reviews.

Make sure you ask your potential agent the right questions. Some questions to consider asking are:

How long have you worked in real estate?

Do you typically work with buyers or sellers?

How many clients do you currently have?

What’s your particular specialty?

Make sure you and your agent are on the same page. Create realistic guidelines for how you will communicate with your agent. This is the number one complaint when it comes to real estate agents—their lack of communication. So, discuss with your agent how you want to be communicated with and how often.

Additionally, it might be worth your while to employ a local real estate agent who knows the area that you want to live in well. A local agent will know all the best neighborhoods and the average market prices in the area.

A good real estate agent will represent you throughout the home buying process to guarantee you find the right home. They will ask the right questions, and ultimately, help you make the right offer.

Real estate agents can seriously diminish your stress level when searching for the perfect home. If you’re a first-time homebuyer, it is especially a smart idea to find a real estate agent that can walk beside you as you make this important step.

Stage 7

Figure Out Your Priorities

After settling on a real estate agent, it’s time to talk through your priorities.

What does your dream home look like? What location do you want to live in? Do you want a single-family home or a multi-family home? How much land do you want?

These are all questions you need to ask yourself when looking for a home.

Here’s a secret—the perfect home does not exist. Most likely, you will not find a house that includes all your preferences and wants. Don’t be discouraged by this. You can still find a house that you love and will suit your lifestyle.

But you will have to figure out your priorities. What characteristics or qualities in a home are an absolute necessity? What things are just personal preferences that you could live without?

Sit down and have a serious conversation with your realtor about what you’re looking for in a house. A good rule of thumb is to do your own research before your conversation with your agent. Look at homes that are available in your price range and in the location you want.

Seeing the homes that are available will also help manage your expectations and know what type of house you can realistically expect to purchase.

Additionally, if you are buying a home with a spouse or partner, make sure both of you are on the same page about what you want in a future home. Create a list of all the qualities you want from a house, and then divide that list into priorities and preferences.

Stage 8

Make A Smart Offer

Once you’ve identified the priorities, it’s time to go shopping! Utilize your real estate agent’s skills and knowledge as you search for your home.

Chances are, you will find a house that fits your budget and includes some if not most of the qualities you’re looking for in a home.

Once you find a house you’re satisfied with, it’s time to make an offer. This can be the most challenging part of the home buying process for some people. You may not be comfortable with the haggling over terms and price that comes with this process.

Negotiation is a key part of making a smart offer.

In an earlier stage of the buying process, you established a budget that fits your financial situation. It’s important not to exceed this budget as you negotiate the price of a house. Remember, the longer the house has been sitting on the market, the more room you’ll have to negotiate with the seller.

Again, this stage is where you can use your real estate agent’s skills. They know what price other similar homes in the area are selling for. If you have a good real estate agent, they will help you make a reasonable offer and can even be a spokesperson for you as you negotiate terms.

This is also the stage in the home buying process when you’ll need to make your earnest money deposit. An earnest money deposit, also known as an escrow deposit, is essentially money you pay to demonstrate to the seller that you are serious about buying their house.

This money will be held in an escrow account and applied to your down payment and closing costs. However, if you decide not to buy the home, the seller gets to keep your escrow deposit. Because of this, make sure you’re serious about the house before making this type of deposit.

Stage 9

Get A Home Inspection

Now it’s time for the home inspection.

By the time you get around to the home inspection you might be looking for a place to save on money—after all, buying a house is expensive!

While you might be tempted to skimp on the home inspection—don’t do it.

This is a very critical step in the house-buying process.

The home inspection will be conducted by a third-party who will take note of any damage or necessary repairs needed in the house.

The last thing you want is to move into a house that has a damaged pipe or a leaky roof!

So, make sure you pay for the home inspection.

If there are serious repairs that need to be made before you move in, you can re-negotiate with the seller. Ask the seller to fix some of the major repairs before you close on the house.

A home inspection will help you identify all the areas in your home that need to be fixed before you move in.

Stage 10

Get A Home Appraisal

Before you close on the house, you should check and make sure your future home is appraised.

A home appraisal is an independent, unbiased assessment of how much a property is worth. Home appraisals make sure the purchasing price of the home matches the home’s true value.

Your lender is only going to provide funds to cover the appraised value of the house. If your appraisal comes in below the purchasing price, you will have to renegotiate the price or come up with the difference on your own.

Essentially, the home appraisal protects the lender. When you purchase a home, the house itself is used as collateral.

If you cannot keep up with your monthly payments and default on your loan, your lender is going to use the loan amount to recover their capital.

Stage 11

Close On Your New Home

You’re in the home stretch—you’ve followed all the stages to a tee, and you’re ready to move into your new home. There is one more step in the buying process you need to follow: the closing.

Before your closing date, walk through the property with your real estate agent to make sure the seller made any repairs they agreed to.

Make sure you review your closing disclosure. This document outlines the closing fees and any additional details involved in the closing process.

The actual closing day typically occurs between four to six weeks after you sign the sales and purchase contract. The closing process itself can take several hours. You will need to sign several documents: the closing disclosure, the promissory note, deed of trust, and certificate of occupancy.

During the closing, the property title will pass from the seller to you, making you the official new owner of your home.

This is also the time when you will pay the closing costs, which hopefully you have been saving for.

After the closing, be sure to store all your documents in a safe location.

Stage 12

Move In!

Finally! After all the hassle, fees, and steps you’ve gone through, you can now move into your home!

A few additional things you’ll want to check off the list shortly after moving in:

Change the locks. This is just a good safety measure to consider.

Change your address. You’ll need to officially change your address with the U.S. postal service so that you can you can receive mail.

Tell your friends and family. Make sure your personal items are getting sent to the right address!

Now that you’ve got everything covered and are comfortably moved in, get to know the neighbors and enjoy your brand-new home!

If this is your first time buying or selling a home, you’re not alone. For many people, navigating the housing market is a stressful, time-consuming process.

Many people wish their realtor would have told them more information before purchasing or selling their house.

No matter what stage of the housing process you’re in, these 10 tips will give you insider information and best practices as you maneuver the complexities of buying or selling your home.

What To Know When Selling Your Home

1. Research Nearby Sales

Do your research. Your realtor can and should advise you about market conditions and how much nearby houses are selling for—but it’s always a good idea to be personally informed.

Keeping track of nearby sales can help you understand how much to sell your own home for.

2. Stage Your House

Pictures matter. Your personal decorative style may not appeal to everyone. You want your home to make the best impression on the most amount of people.

Staging refers to strategically decorating, furnishing, and refreshing your home to appeal to potential buyers.

Staged homes are proven more likely to sell than homes left in their original state.

Take the extra step—stage your home to guarantee best results.

3. Update The Interior

Related to the idea of staging is updating the interior of your home. Again, you want your house to look its very best when trying to sell it. Maybe one of your bathrooms is decorated with outdated wallpaper. Now is the time to make those home improvements you’ve been avoiding.

Your home is more likely to sell if it is aesthetically appealing.

Making necessary home improvements might create additional costs for you, but those costs are going to be worth it if it means selling your house faster.

4. Niche Marketing

There is something unique about every home. Find the best features of your house and emphasize them. Is your house small? Market your house as a comfortable home to downsize in.

Make sure your agent highlights your home’s unique qualities in the listing.

Emphasizing the best features of your house will make it more appealing to potential buyers who are looking for specific qualities for their future home.

5. Take the Good Offers

People are often hesitant to sell their house after the first couple offers. Don’t rule out a good offer just because it’s made early in your selling process.

The value of your home will continue to decrease the longer it sits on the market.

It can feel intimidating to sell your home quickly after placing it on the market. Many people like to wait and see if a better offer comes their way. But don’t let an early offer deter you from seizing a perfectly good opportunity.

Remember, your goal is to sell your home. The quicker you can do that, the better.

What To Know When Buying A Home

6. Know Your Credit Score

Your credit score will determine what your loan terms will be. Build up your credit score if it is currently low.

A good credit score results in a low-interest rate when buying your home. This can save you thousands of dollars in the long run.

7. Be Willing To Increase Your Budget

This might sound scary at first. Who wants to increase their budget?

However, many realtors have noticed that their clients end up increasing their budget—sometimes by as much as 50%.

As you start looking at houses, you might realize your budget just doesn’t get you the kind of home you’re looking for. That’s why it’s important to start your budget in a flexible position. Create a budget that you could increase if you needed to.

You might find a home within your original budget—it’s definitely possible. But it’s also nice to open yourself up for future opportunities.

8. Pay For A Home Inspection

Don’t skimp on the home inspection. Buying a home includes a lot of extra fees. By the time you’re ready for the inspection, you might be ready to pay the minimum amount, or just skip the home inspection completely.

Don’t do that.

The home inspection is critically important for making sure your future house is up to the proper standards. You don’t want to move in and be surprised by unknown water damage or mold in the basement.

Paying for a home inspection now will keep you from spending thousands of dollars on repairs later.

9. Buy In A Growing Neighborhood

This is a smart investment plan.

Maybe you aren’t raising kids who need to attend a good school system. But if you ever decide to sell your home, that’s what a lot of potential buyers will be looking for.

Maybe you don’t plan on moving for a long time—but plans can change. Buy a house in a desirable location that will be easy to sell if you ever need to.

10. Understand All The Expenses

There are countless fees that incur when buying a home.

Besides the mortgage, you have to worry about insurance, repairs, property taxes, association fees, and more. Make sure you are aware of and understand all the additional expenses attached to purchasing a home.

And make sure you can afford them. You don’t want to buy a house without understanding how much it really costs.

Do You Need Advice?

Whether you’re buying or selling a home, there are lots of things you need to know. Because of that, knowledgeable agents are a great asset as you move forward in the housing process. Kim Clark is a friendly, reliable agent who can answer any questions you may have about the buying and selling process. Contact Kim today!

The COVID-19 pandemic has drastically altered every aspect of life and business in the past several months. The real estate market is no different.

If you were looking to buy or sell a house this spring, you have likely been watching how COVID-19 would impact the housing market. Traditionally, spring is considered the best time of year to buy or sell a home—but this year, real estate transactions are at an all-time low.

As the number of COVID-19 cases increases, stocks have dropped, businesses have closed, unemployment has risen, and millions of Americans are staying home. With the uncertainty surrounding our current situation, it’s no surprise that the housing market has taken a substantial hit.

So, what do you need to know about the housing market moving forward?

Buying a House in the Current Market

If you were planning on buying a home and are now unsure what to do, you are not alone. Many future homeowner’s plans were altered given the unpredictability of the current housing market.

In March, as social distancing guidelines increased, agents reported that buyers were less inclined to make a purchase at this time.

Despite the understandable hesitancy to buy, Forbes reports that buyers are currently in a positive position given the state of the housing market. In fact, if you’re looking to buy a home right now, you’re actually more likely to get a good deal, since fewer people are in the market to buy.

Another important trend to keep an eye on are the changing mortgage rates. Mortgage rates have significantly dropped since the onset of COVID-19 since the Federal Reserve cut interest rates.

If you already own a home, you might consider refinancing while rates are low; other homeowners are already taking advantage of this opportunity.

If you’re looking to buy a home, this is a good time to take advantage of lower mortgage rates. Keep in mind, while mortgage rates have dropped, the pandemic has made credit harder to get. Chase Bank now requires a 700-credit score and a 20 percent down payment to receive a mortgage loan.

Given the unpredictability of the current situation, these trends are important to watch as the country continues to respond to these unprecedented times.

Is It A Smart Idea To Sell My House?

The global pandemic has made many potential sellers nervous, and for good reason.

Web traffic to real estate sites like Zillow dropped by nearly 40 percent immediately following the pandemic.

The rules and regulations for selling houses are still unfolding.

Right now, you might feel uncomfortable selling a home in the traditional way, with guided tours and handshakes. In general, many people who were considering selling their homes are taking a step back and proceeding with caution as they wait and see what the housing market will do.

If you’re trying to sell your home, you should be aware of some growing trends the pandemic has accelerated.

For example, online shopping is at an all-time high, which has impacted many sectors, including real estate. While states are beginning to open up, many businesses are still limiting in-person contact, meaning virtual house showings may continue, and may even become the new normal.

Again, it is difficult to make a definite prediction about the future of real estate. Whether you’re trying to buy or sell a home right now, keep monitoring the housing market. As the country continues to return to more normal practices, people will start to regain confidence in buying and selling homes.

What To Expect From the Future

There is no doubt the ongoing pandemic has affected the real estate market. Given the uncertainty of the virus and when the country will return to normal, the market’s recovery will likely be gradual.

However, there is some good news. Many experts believe the housing market will see a massive boom following the COVID-19 pandemic. Since people are waiting to buy or sell their homes right now, they will be anxious to do so once things get back to normal.

These results may be a long time coming, but there is reason to believe there are better days ahead—for real estate and the rest of the world.

Get The Help You Need Today

Given the current uncertainty of the housing market and the future of real estate, getting help from a knowledgeable source is a good plan. If you’re trying to buy or sell your home, real estate agent, Kim Clark in Kosciusko County is happy to sit down with you and discuss your options. Call her today!

If you’ve ever been around a group of people who don’t speak the same language as you, you know the confusion and frustration of trying to understand what they are talking about as it applies to you.

Well, there are thousands of people who know your pain: Homeowners experience the same frustration every time they have to make decisions about mortgages! Keep reading to receive basic knowledge for what to expect when applying for mortgages.

How Is A Mortgage Determined?

The amount of your monthly payments for a house is determined the same way regardless of the type of mortgage you decide works best for your future plans with the home. A mortgage is determined by the interest rate multiplied by the principal, plus a small amount of the principal itself.

Most Common Mortgages

The purpose of a mortgage is to, not surprisingly, pay for property. The amount you pay monthly is different depending on what type of mortgage you sign up for.

The two most common types of mortgages you will hear realtors and mortgage companies use are called Fixed-Rate Mortgage or Adjustable-Rate Mortgage. These two types are fairly self-explanatory, however, there are a couple of things you need to consider about each one before deciding.

Fixed-Rate Mortgage: This type of mortgage means that no matter what, throughout the life of your mortgage, your interest remains the same, and your monthly payment does as well. This type of mortgage is best if you are living off a specific budget, and need a consistent payment plan.

A fixed-rate mortgage can be set up in two ways: a 15 or 30-year mortgage. If you can afford a 15-year mortgage, your payments will be more expensive than a 30-year mortgage, but you will cut through your interest much faster and then own your home in a shorter amount of time. However, if budgeting is your main goal, a 30-year mortgage is your best option for the lowest monthly payment.

Adjustable-rate Mortgage: As you probably already guessed, an adjustable-rate mortgage (also known as an ARM) comes with an adjustable interest rate. The best part of the ARM is that the interest rate starts out lower than the average market rate. Adjustable-rate mortgages are the way to go if you are planning on paying off your home as fast as possible, and can afford to do so.

Keep in mind that if you choose an ARM, your interest rate will fluctuate, and that doesn’t always mean it will fluctuate in your favor. If the interest rate rises above more than you can afford, you will still be responsible for your monthly payment.

So, again, paying off your mortgage quickly sounds amazing–especially if it’s mostly now interest!–but make sure you are capable of handling those adjustments as they come.

Get Help Deciding Today!

Obviously, mortgages and looking for houses go hand in hand. Because of that, reliable, knowledgeable, and friendly realty agents such as Kim Clark in Kosciusko County, Indiana, is more than willing to sit down with you and discuss your questions about mortgages. Call her today!

Whether you’re the seller or a buyer in a realty contract, you each share the same end goal: Finalize the sale! That’s why, as a seller, committing to pay for the first year of the home’s warranty is such a good idea in order to close on the contract with the buyer no matter what.

As the buyer, if your contract includes a home warranty, you can know that the seller is working in good faith, even despite the quirks of the house which are still apparent after the home inspection.

What Is A Home Warranty?

A home warranty is different than house insurance. Whereas insurance covers you in case of property damage, a home warranty helps you acquire repairs to any large appliances in your home. Although each policy has slight differences, a typical warranty includes coverage for:

– Kitchen appliances
– Air conditioning/heating units
– Laundry appliances
– Plumbing
– Electrical
– Roof leaks

A house inspection points out age and working conditions of most of these items, but as a seller, a home warranty is beneficial to provide for the buyer if those repairs are not something you are ready to take on yourself before the sale is finalized.

Why Is A Home Warranty Beneficial?

Everyone knows a new home brings with it projects which can quickly add up. Even your dream home has a few quirks that will need to be fixed eventually! A home warranty lasts for 12 months and can be purchased at any time through the life of your mortgage.

Although home warranty plan prices fluctuate depending on where you live, plans typically cost around $75 a month. Renewing your coverage each year is a wise idea, but not required. Keep in mind that if the seller of your home purchased a year of coverage for you as the buyer, that only covers the first year.

If one of your appliances need repairing, you call the company supplying your home warranty, and they will send a registered technician out to assess the issue. Once that is done, you will only pay the service fee for the repairs to be completed. This fee is usually around $125.

Despite the fact that early on into owning your own home $125 doesn’t sound like pocket change, this is only a fraction of the cost which you would have to pay out of pocket otherwise. For comparison, a standard water heater replacement usually costs anywhere from $400 to $1,600. Home warranties can save you more money than you think!

Although home warranties are always a wise investment, make sure you know how old your appliances are when you first move into and/or sell your home. Most appliances come with a 1-3 year warranty which can also assist with the replacements or repairs of your appliances if they are still within that specific time frame.

Need Help Deciding?

If you’re still not sure whether a home warranty is right for you, it’s never a bad time to set up an appointment with an experienced realtor for advice. Kim Clark has several years of experience and knows the specific details you may not be aware of in regard to home warranties in Kosciusko County, Indiana. Make an appointment with her today!