Are you ready to buy?
Sometimes when we go to a shopping center we see something that catches our attention in a store and we buy it without first checking our budget. The same happens with houses, a friend or family member buys a house and we get excited and decide to buy a house without asking ourselves if we are really ready to buy a house.
In this guide we share a series of guidelines to keep in mind to make your dream of buying a house in Orlando come true without it becoming a problem in the future.
Before going out looking for a house
Many people wonder how much is the most you should pay for a house, but the real question must be “how much can I pay for a house?”.
Before you go looking for a house and get excited about one that you like, you must define your budget. If you have been pre-qualified for a loan for a certain amount, it does not mean that you should buy a house for that price. Although it is important to know your debt capacity and identify your needs, only when you establish a budget you can identify how much you should pay for a house. Now, if you have the necessary solvency, you can afford to buy in cash.
How to make a budget?
To prepare a budget you can follow these 3 simple steps:
- Identify monthly savings. Make a list of all your household income and another of all expenses. Then subtract expenses from your income and you’ll get the amount you can save each month.
- Set your priorities. If the amount of money you save each month is not enough, identify your priority expenses and try to reduce other less necessary ones.
- Control your expenses. Make use of an app, spreadsheet or physical notebook to write or enter all the expenses you have every day, no matter how much the amount is, then create several categories (food, transportation, health, insurance, clothing, entertainment, etc.) and frequently review your expenses to identify which ones you should reduce.
How much can I pay for a house?
The important thing is not to know how much money they can lend you but how much you can pay each month. It is recommended that your monthly mortgage payment does not exceed 28% of your monthly gross income. For example, if your monthly gross income is $6,000, the maximum amount you should pay in mortgage is $1,680, corresponding to 28%. If you buy a home with a mortgage over 28% of your gross income, you may have future financial problems due to lack of planning.
How much should my initial payment be?
The best recommendation will always be to pay 20% of the initial fee, since it would save the payment of a private mortgage insurance (PMI) that is included within your monthly payment. By paying 20% down payment, you will considerably reduce the monthly amount to be paid on a mortgage.
Now, it does not mean that if you have not saved 20% of the price of the house you should not buy a house. There are types of loans like the FHA that only requires you to initially pay 3.5%.
It is true that the higher the down payment the lower the monthly payment will be, but this does not mean that we should run out of our savings just to make a larger initial payment and be with an empty back account. In life we are always presented with unexpected situations for which we must be prepared, and even more when we are homeowners, therefore we recommend that you have an emergency fund that will help you to cover for any unwanted incidents if they arise.
What is your lifestyle?
It is important that you review your lifestyle, and that it is within your monthly budget otherwise you’ll have to sacrifice some of the things you like in order to pay the mortgage, and if you are willing to do in order to buy a house and to own your very own property. You can also consider buying a less expensive house, even if it is not the house of your dreams, but one that allows you to maintain your lifestyle and to capitalize. After a few years the house will have acquired value and you can sell it to buy the house of your dreams.
Buying or renting?
This is a question that many people ask us and we answer with the following example: If you are paying a rent of $ 1,700, why instead of paying the homeowner’s mortgage, don’t you pay your own mortgage? With that monthly money, you are paying the debt of another person who, probably once you finish paying that mortgage, will continue investing in Orlando real estate to rent long-term or vacation homes. Now, if you are renting temporarily or you don’t have a good credit score, renting a house in Orlando is the best option.
Sell one house to buy another?
If you are going to sell your house in Orlando to buy another one, it is important that even when you have the money earned from the sale, analyze your income and fixed expenses. It is also necessary that you have an established budget so that you do not commit to debts that you do not know if you will be able to assume.
There are several options when you want to sell your house to buy another one. One of these is to make an offer for the house you want to buy and place as a contingency that you must sell yours first. Now, you must be aware that these types of contingencies can make the seller lean towards another offer even if it is for less money.
When you have the need to sell a house to buy another, you can make mistakes that do not allow you to get the best return on the sale of your home. That is why we recommend you consult with a real estate agent before taking that step.
What aid does the government offer?
The government generally offers some types of help, including for first-time homebuyers. Here are some links for you to learn about the types of aid the government offers. It is important that you review all requirements to access them. A real estate agent will be able to advise you so that you can make the best decision in case of applying for some type of help. Contact us to advise you in the process of buying your home.
After reading all these guidelines you will be able to identify if you are ready to buy a home or not. If so, we invite you to continue reading the next step of our guide “Looking for the home of your dream“.
If this guide has been useful to you and you think it can help other people in their process of buying a house in Orlando, we invite you to share it on your social networks.