Before you take the plunge: what you need to know about buying a home
There’s a scene in the movie “Baby Boom” where the New York executive played by Diane Keaton, fed up with the rat race, opens a magazine she’d been saving, turns to the page with an advertisement for a beautiful old house in Vermont and calls the real estate agent listed to buy that property.
For 99 percent of the nation’s population, it just isn’t that easy.
Actually, when I work with buyers in Saratoga County and neighboring areas, we discuss all the due diligence that goes into buying a house. Potential home buyers need to start thinking about affordability and mortgages before beginning to look at properties. It keeps the search realistic -- there’s no point, after all, at looking at homes tens of thousands of dollars out of your affordability range -- and it makes negotiating easier if you enter into a transaction with your finances in order.
Financial guru and author Dave Ramsey advises that buyers spend no more than 25 percent of their monthly take-home pay on housing, which includes principal, interest and taxes; other experts say that payment shouldn’t exceed 28 percent. Discover pegs that amount at no more than three to five times your annual household income, provided you have a 20 percent down payment and a “moderate amount of other debt.” You can use an affordability calculator to give you an idea of a potential monthly payment.
Still, these are just generalities. Everyone has a different financial situation. A mortgage professional will collect your financial information, tell you how much money you can borrow and stand ready to work with you by getting you pre-approved for a mortgage. In a competitive situation, a seller likely will look at your offer more favorably than that of someone who hasn’t been approved.
Next week: Let’s go house hunting! Where do you want to look? Saratoga Springs? Malta? Clifton Park? Burnt Hills? Glens Falls? Just let me know!