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Category Archives: Purchasing a Home

First-time buyers oftentimes have trouble figuring out how much they should contribute to their down payment.

What’s the right size for a down payment?

 

First-time homebuyers often do not know how much they should contribute in upfront costs on their new house. They don’t want to overpay, as they want a cushion in savings, but they also want to put down enough money to qualify for their lender’s approval. If homeowners can afford to pay the ideal amount on their down payment, they should do so. However, if they do not have enough savings to do so, they can look into alternative options.

The optimal down payment
Typically, lenders prefer buyers to put at least 20 percent down on the house. If this is the minimum they will accept, the buyers might need to secure the mortgage by taking out a second loan. Before the 2008 recession, lenders did not always require buyers to put a minimum amount of cash down on the home. Some buyers could even take out mortgages that cost the full asking price of the home. However, the recession caused families to default on mortgages, especially ones with smaller down payments, leaving many of them facing foreclosure.

Options for smaller down payments
When homeowners want to buy a home but cannot afford the full 20 percent down payment, they have a few different courses of action:

  • Get private mortgage insurance. When homebuyers put less than 20 percent down, their lender might require that the mortgage be insured in case the buyer has trouble making payments in the future. These premiums typically cost between 0.3 percent and 1.15 percent of the loan amount each year, according to SmartAsset.
  • See if they qualify for FHA-approved loans. Zillow reported that the Federal Housing Administration backs loans for buyers with a decent FICO score and who are willing to put approximately 3.5 percent down.

For more information about this article, call 866-614-5959.

Deciding if you're financially prepared to buy a home means looking at your current debts, earnings and savings.

How to know if you’re financially ready to buy a home

Current renters might be wondering if it's time to buy their first homes. Going from monthly rent payments to paying off a home is a big step, but it can be an excellent investment for people looking to settle down. Down-payments and mortgage costs might scare prospective buyers from taking the leap, especially if they still have debt from car or student loans.

Some of the most significant benefits of buying a home include:

  • Tax-deductible interest payments.
  • Flexible mortgage options.
  • Freedom to make the house into a home without needing the landlord's permission.

However, some costs homeowners make that renters do not worry about include:

  • Paying for home repairs and renovations.
  • Homeowner's insurance.
  • Property taxes.
  • Real estate broker expenses, if moving.

If individuals have enough finances to pay for a house in cash, they can afford to buy the home. However, if they don't the means to do this, as is the case with many Americans, they should consider taking out a mortgage. If households have the funds to get a mortgage, they should be financially ready to buy a house. What kind of income and savings can qualify individuals for mortgages?

Back-end debt-to-income ratio
The Federal Housing Administration typically uses this standard when approving mortgages. A back-end DTI of 43 percent typically suggests that homebuyers can afford to make their mortgage payments every month. The types of debt that make up this number include (but are not limited to):

  • Mortgages
  • Mortgage insurance
  • Property taxes
  • Homeowner's insurance
  • Student loans
  • Credit card fees
  • Car loan payments

According to this FHA guideline, these regular debt payments and housing-related costs should not be more than 43 percent of the household's monthly gross income.

Front-end debt-to-income ratio
Some mortgage lenders might take this number into consideration. This ratio is similar to the back-end DTI, but only considers debt regarding housing costs. According to Bankrate, lenders consider an ideal front-end DTI to be no higher than 28 percent.

How to calculate front- and back-end DTI
To demonstrate how to calculate both types of debt-to-income ratios, it might be helpful to provide an example. Using the following monthly expenses, what is this household's back-end DTI?

  • Gross earnings: $5,000
  • Student loans: $250
  • Credit card fees: $100
  • Car loan payments: $372

To figure out the target back-end and front-end DTI, multiple the gross income by 0.43. This means these homebuyers should have a back-end DTI below $2,150. Since the sum of the amount given is $722, this means the housing-related expenses should be below $1,428.

Calculating the front-end DTI means multiplying the gross income by 0.28. When searching for homes, this household should try to maintain a front-end DTI of approximately $1,400. This means the sum of their mortgage, mortgage insurance, property taxes and homeowner's insurance should be around this cost on a monthly basis.

Making sacrifices
If potential homeowners enjoy going to expensive restaurants, traveling to exotic locations working out at high-class gyms or doing costly activities on the weekends, they might need to give some of these expenses up when saving for a house and affording mortgage payments. If they are not willing to forfeit these pricey hobbies, they might not be ready to make the investment commitment of purchasing a house.

Saving for retirement
Before buying a house, individuals should have started saving up for retirement. Perhaps they have a workplace 401k plan or an IRA, in which a percentage of their earnings go directly into their retirement funds. The Balance recommended individuals have 10 to 15 percent of their income in their retirement plan.

Preparing for the worst
If something unexpected happens, like losing a job, getting a divorce, experiencing a costly health problem or making a poor investment, homeowners should always have a cushion to fall back on. Without a backup plan in mind, people can lose their homes to short-sale or foreclosure, which can be extremely damaging to their finances and credit scores.

For more information about this article, call 866-614-5959.

Closing on a home is a crucial step in the home-buying process.

What to expect when closing on a home

Moving into a new home can be exciting. It might be a first home, a fresh start, an upgrade or a downsize. Regardless, changing addresses is the beginning of a new chapter. Despite the excitement of buying a home, closing on one isn't quite as enjoyable of a process, though it is imperative that this process goes smoothly. The National Association of Realtors reported that 31 percent of home sales in August of 2018 were from first-time buyers who have probably never experienced a closing before.

Between price negotiation, home inspections and contract-signing, both parties can get burnt out by the end of the homebuying process. Although buyers are ready to celebrate once they've signed the Purchase and Sale Agreement, their work isn't complete just yet. There are several steps between the contract negotiation process and the first moment new homeowners cross the threshold into their new place. We've compiled a list of what buyers should expect when closing on a house, as well as a checklist of tasks buyers should perform before closing day.

What to expect at the closing:

The audience
Buyers might wonder who exactly is going to be present at a closing. The answer depends on what state the closing takes place in. Often, buyers and sellers will both attend the closing. In other situations, buyers and sellers have separate appointments to sign the papers. It is important to note that the closing agent is not a real estate agent. A closing agent might be a title officer, an attorney, an escrow company officer or another qualified, unbiased third party. Buyers and sellers might also have their real estate agents in attendance. Some states require an attorney, who is not also the closing agent, to be there at closings.

Things buyers can't forget
At a closing, buyers need to have a few belongings in their possession in order to allow the process to go by as quickly and efficiently as possible. They should typically bring:

  • Photo ID in the form of a valid driver's license or passport.
  • Proof of insurance. The closing agent needs proof that the buyers have an insurance policy beginning on the date of the closing. They might also need to bring along a receipt showing that the buyers have paid the policy for a full year.
  • Final purchase and sales agreement. If the buyers' agent comes to the closing, they may bring a copy of this contract.
  • Cashier's check. Personal checks do not suffice in making the down payment and closing costs. The closing agent informs buyers ahead of time to whom the check should be payable. If buyers decide to wire the funds instead, they need to do this ahead of time to make sure the bank approves the payment.

Papers to sign
Buyers dread closing day primarily because of the amount of paperwork they need to sign. According to Zillow, just a handful of the documents homebuyers must sign on closing day include:

  • Closing disclosure.
  • Proration papers.
  • Declaration of Reports.
  • Abstract of Title.
  • Statement of Information.
  • Warranty deed.

The closing can take an hour or two, depending on how quickly the process moves along. Once it's over, buyers can take a deep breath, massage their writing hand, which are cramped from signing too many pages. The next step is to move into their home. However, before this process, the buyers should have completed several tasks to prefer for move-in day.

What to do before closing on a house:

Call a locksmith.
Without a new set of keys and locks, new homeowners will have trouble getting into the house. Even if the sellers seem like trustworthy people, they certainly should not have access to a replica key to their former home. Once buyers know the move-in date, they should schedule a locksmith to install new locks a few days ahead. Booking this professional to arrive on the morning of the move-in day could be cutting it too close, in case the locksmith is running late.

Hire movers.
In addition to scheduling a locksmith, buyers need to hire a moving company as soon as possible. Particularly in the busiest moving months, such as June and September, the highest rated companies book up quickly. If the homebuyers plan on moving their furniture themselves, they should still rent a moving truck immediately. Waiting too long might leave buyers stranded or frantically searching for trucks during the days leading up to the move.

Call the utility companies.
Notifying cable, gas and electric companies approximately a month before the move-in day can give these providers enough notice to switch services to the new address. Unless buyers want to spend the first few nights in their new home by candlelight without electricity, heat or Wi-Fi, they should add this task to their to-do list.

Hire painters and contractors.
Buyers who are planning on hiring painters should do so ahead of time. Until the walls are complete, buyers cannot put their furniture into place, preventing their house from feeling like a home until the painting job is complete. Especially if buyers are moving into a fixer-upper, they should start interviewing general contractors ahead of time. To find a trusted contractor, they might ask friends and neighbors, search online reviews and research their previous work. They should ask for cost estimates ahead of time to plan other budgeting accordingly.

For more information about this article, call 866-614-5959.

Buying a home before it hits the market can put buyers ahead of the competition.

How to buy an off-market house

Homebuyers with their eyes on specific homes, or ones who want to be at the front of the line when homeowners make the decision to sell, might try to find their ideal properties before they hit the market. Interested parties might hear about an off-market opportunity through the grapevine, or perhaps they leave a letter in their dream home's mailbox, informing the homeowners of their interest should they decide to sell the property. Just as sellers have different motivations for moving, buyers often have various tactics for pursuing desirable properties. 

In 2016, only 8 percent of home sales in the U.S. were off market, according to the National Association of Realtors. Many people, particularly first-time buyers with limited experience in the real estate market, prefer to use real estate agents and brokers to guide them through the selling and buying processes. This NAR study also reported that 58 percent of "for sale by owner" homes sold in less than two weeks, suggesting that many sellers know their homebuyers. This compares to the overall average days houses spend on the market, which currently adds up to 61 days. Navigating off-market property trends can be difficult, but the buying process accelerates exponentially.

Finding off-market homes
The easiest way to find properties before they officially go on the market is to ask real estate agents if there are any listings they are trying to get. Real estate agents may use prospective buyers to entice sellers to take the leap. Buyers who express interest before the home officially hits the market are typically first in line for showings and offers, since sellers want to speed this process as much as possible.

Homebuyers can find out about for-sale properties before they hit the market by keeping their eyes and ears open for homeowners' life transitions. Parents expecting a child might want to upgrade to a larger home, while those becoming "empty nesters" might plan on downgrading.

Compromising on a price
One component that can make or break the home sale is the asking price. If the seller highballs the buyer, the latter could dismiss the offer. Buyers might lowball the value if they aren't aware of certain home improvements. Both parties need to find a fair price to compromise on.

An effective way to get an accurate estimate is by hiring home appraisers to represent both parties. Once the professionals offer their estimates, the buyers and sellers can average these two figures. If either believes this number does not accurately reflect the home's market value, they can call in a real estate agent.

Calling in professional assistance
Sellers and buyers often consider conducting an off-market transaction to save on a real estate agent's typically 6 percent commission. However, they often hire real estate professionals during this process. Both sides might feel uncertainty about overpaying, in buyers' cases, and underselling, in sellers' cases. Hiring an agent can provide both parties with peace of mind that they are getting the best deal possible.

Real estate personnel have the expertise to establish a home's fair purchase price based on market trends. In a high-demand, low-supply market, the agent might award the sellers with savings. In a high-supply, low-demand market, the buyer might reap the monetary benefits.

Both parties can hire real estate agents for advice in the sale of off-market homes for a single fee. If the agent's role is solely to help them come to a compromise regarding the home's value, they might be paid for a day's work. Buyers might decide to keep agents on to deal with the back-end components of the sale. They might construct the contract, hold a home inspection, perform a title search and prepare the closing disclosure. Since they wouldn't be involved in marketing the home or holding showings and open houses, the 6 percent commission can likely be reduced.

Following instincts
A particularly helpful piece of advice for buyers of off-market homes is to go with their gut. Don't allow the sellers to take advantage of you. If you feel hesitant, call in professional assistance. You might have to pay a small commission in exchange for an agent's services, but the potential risks you could face by pursuing an off-market transaction on your own might not be worth it.

For more information about this article, call 866-614-5959.

Buying an old home means investing in charm in history. However, antique houses aren't right for everyone.

Reasons to buy an old home

When shopping around for a place to live, homebuyers might take the neighborhood, aesthetic and features of a home into consideration. One factor that might seal the deal or scare away prospective buyers is the age of a home. Many people view older homes as a challenge and a steal, while others see these properties as a red flag. Deciding if you should purchase an old home depends on a variety of factors, including a look at the benefits and drawbacks of aged properties.

The median cost of a new home in Jan. 2018 was $329,600, according to the United States Census Bureau. This contrasts the median price of an existing home during this same month, at $240,500, as reported by the National Association of Realtors. Buying an antique house might seem like a cost-effective solution, but with all expenses taken into account, buyers might not make much of a profit off an older property.

What to watch out for in older homes
One reason many homebuyers are hesitant to pursue an old home is the risk of outdated systems. Central air, furnaces, plumbing, electrical components or roofing that haven't been upgraded in a long time can be problematic in older homes. Bankrate noted components that haven't been updated in over a decade to be considered in the pricing of the home. Buyers should add these replacement costs into their budgets if they decide to purchase a house.

The pros of buying an old home
It is important to note some common features associated with older homes. As the expression goes, "They don't make them like they used to." Aged properties tend to have mature landscaping, like vast trees and shrubs. They might have larger yards, as land was cheaper years ago. Older homes may have more character than many new houses in town. Victorians, Tudors, Colonials and other antique styles are unique and charming.

Another substantial benefit of buying an old house is how established the neighborhood is.The Balance contributor and real estate broker-associate Elizabeth Weintraub said older areas are less likely to undergo zoning changes than newer areas. This mean the area probably won't make any possibly undesirable additions to the neighborhood, like chain restaurants or factories. Older properties tend to be situated closer to the center of town, which could potentially put buyers within walking distance of schools, restaurants, shops and supermarkets.

The cons of buying a new home
Purchasing a charming old house can come with some burdens and drawbacks. For instance, older homes tend to have smaller closets, garages and bathrooms than houses built in the last two decades. Old houses are generally more compact than new ones. Perhaps new homes' larger sizes are to accommodate more material items and larger family sizes of the 21st century. Since the foundations and floors have aged, the house might require more maintenance, such as keeping the floors from sloping and the chimney from corroding. Unless the previous owners took it upon themselves to renovate the home's interior, buyers might need to upgrade the kitchen to keep it from looking antiquated.

For more information about this article, call 866-614-5959.

Listing and selling agents offer helpful expertise to homebuyers and sellers.

What’s the difference between a listing agent and selling agent?

Home sellers and homebuyers might work directly with listing and selling agents. Although people often use these terms interchangeably, these two types of real estate agents serve different purposes.

Listing agents
Sometimes in television shows and movies, a real estate agent will bake cookies in a home immediately before an open house to leave the space with comforting, mouth-watering scents. This individual is known in the real estate world as the listing agent. This agent is in charge of helping home sellers market their properties. According to the National Association of Realtors, 89 percent of home sellers used real estate agents in 2016.

These agents help sellers put their homes on the market for competitive prices. They usually have expertise regarding the current housing market in the area. They have access to up-to-date information about how similar properties in the same neighborhood and town have sold in recent years. This database might include exact costs, the amount of time homes spent on the market before closing and what deterred buyers from making offers. With this information, listing agents can provide guidance and advice on how they can work with sellers to sell the home.

Listing agents might be involved in staging the homes they are trying to sell. This might include baking sweet-smelling treats or adorning the living room with fresh, eye-catching pillows. Listing agents understand how something as simple as the room's color scheme can subconsciously interfere with prospective buyers' perceptions of the place. They know the importance of creating a space that looks polished and homelike, where buyers can envision themselves living.

Once listing agents begin holding open houses, they will keep in touch with buyers who are interested in making serious offers. After homes sell, listing agents will walk the homeowner through any paperwork associated with closing on the property. Listing agents typically receive a specific percentage commission on the sale price of the home. This amount gets split with the selling agent and the selling and listing brokers.

Selling agents
These real estate professionals work on the other end, assisting prospective homebuyers through the process. Sometimes they are known as buying agents before any contracts come into play and as selling agents during the negotiation period, according to Bankrate. NAR calculated that 87 percent of buyers used selling agents in 2016, a number that climbed from 2001's 69 percent.

The work that selling agents perform differs from what listing agents do. They search for properties that fit their clients' needs, set up showings with the listing agent, communicate with the sellers regarding buyers' offers and walk buyers through the offer process. If you've ever seen House Hunters on HGTV, you might understand selling agents' duties.

Deciding if listing and selling agents are necessary
Some buyers and sellers choose not to use representation. They might decide to go house hunting independently or put their homes on the market without an expert's guidance. However, many people find that hiring professionals saves them a lot of legwork. In addition, some listing agents will take offers seriously only if they come through selling agents.

Before hiring a listing or selling agent, it is imperative to speak with multiple agents. References from past clients, their experience in the town or neighborhood and even their personality and temperament are crucial factors to consider when choosing the right agent.

For more information about this article, call 866-614-5959.

Prospective landlords should research their investment property before making a down payment.

What to watch for in investment properties

Individuals looking to profit from land ownership might consider buying a residential rental property. For first-time landlords, navigating the rental market can be overwhelming. Investing in the right real estate can be lucrative, but buying the wrong building can turn into a financial burden. Before purchasing a rental complex, investors should investigate several factors.

Location
The town or neighborhood of a rental property might impact the types of tenants choosing to reside there. An apartment complex near a college might attract an abundance of students, and a building in the downtown area of a city may attract professionals working down the street. The desirability of the neighborhood plays a factor in how long units remain vacant. A building in an up-and-coming or popular location may entice prospective renters to apartment openings, while a neighborhood that is notorious for being unsafe might make it more difficult to fill vacancies.

Investopedia noted the importance of proximity, depending on buyers' intentions regarding management. If they plan on managing the premises, they should inquire about properties that are close to where they live or look at options where they can live on site. Many investors purchase two-story or split level homes and rent out a floor while living on the other one; in these instances, landlords have immediate access to the rental property. If they expect to hire a property manager, they don't have to worry as much about where the land is situated in relation to their address.

Property taxes
Considering investors make a great deal of their money from rent, they should learn just how much they will pay in taxes. The district's assessment office should have most of the relevant tax information on file. It is also worth noting that property taxes can rise over the years. If the area is desirable, a hiked rent could suffice to make up for any shortcomings, but this strategy could pose a problem if real estate taxes increase in areas in which landlords might have trouble finding renters to agree to a higher rent.

Crime rate
Owning an apartment complex in a crime-ridden area could scare away prospective renters. The local police department likely has updated statistics regarding the frequency and degree of crime in a city and neighborhood. Before buying an investment property, future landlords should always look into these numbers.

Average rent
Before buying investment real estate, individuals should consider their rent price point. To formulate their estimates, landlords should compare the average costs in the area. From there, they should look into what amenities and features these units include. Buildings with laundry appliances in each apartment may charge a higher rent than apartments without this component, for instance. After deciding a fair rent, prospective investors can determine whether or not the property provides a return on investment.

1 percent rule
It's true that sometimes people need to spend money to make money. However, balancing the amount spent with the realistic monthly earnings is crucial to ensuring landlords they are making a strong investment. According to Forbes, investment properties should provide a return on investment. This rule states that the monthly rent divided by the cost of the land is .01 or 1 percent.

Future expansion
The construction of new buildings and parks can incentivize renters to move to certain areas. Other times, new structures can make an area less desirable. Buildings that obstruct an apartment's view or replace important features, like green areas or parking lots, may make renters hesitant to renew their leases. The city's planning department should have copies of new development plans in each neighborhood. Prospective landlords should ask a city employee about information involving development strategies within a few blocks' radius from the prospective investment property.

For more information about this article, call 866-614-5959.

For homebuyers looking for a fixer-upper, an as-is property can be worth the risk.

What can buying as is mean?

For homebuyers, "as is" properties can be one of two things: a deal breaker or an opportunity. When sellers list their properties on the market as is, they may not handle repairs or home improvements before the sale. Instead, the buyers typically cover these costs.

Buyers looking for a move-in ready home may be put off by the work involved in these fixer-uppers. Others delight in restoring disheveled properties, as they offer a blank slate for buyers to build their dream homes. Some homebuyers even make a side business of buying and flipping these kinds of properties.

Why are homes sold as is?
Many sellers prefer to polish up their properties, making them as move-in ready as possible. They might update kitchen appliances, apply a fresh coat of paint or even hire a stager to polish their furnishings for open houses.

Other sellers are not as fortunate. Perhaps they do not have the funds to update the property, leaving them with no choice but to sell the house in its present condition. As-is homes may be at the lowest possible cost. As-is sellers may be selling their homes at the lowest possible cost in instances of short sale or foreclosure. Some homeowners pass away, leaving their properties behind for their heirs, who want to sell the houses quickly.

Who should buy as-is properties?
For buyers looking for move-in ready homes, as-is listings can seem daunting. These fixer-uppers are not meant for everybody. When purchasing an as-is home, buyers face risks such as uneven foundations or plumbing malfunctions, which may be expensive to repair or replace.

Generally, the primary benefit of buying an as is property is its price. Sellers typically list these homes at low price points initially and might accept even lower offers if they are desperate to sell.

Exemplary as-is buyers are handy and willing to fix up properties to their liking. If they aren't skilled craftspeople, they might have an eye for design and the funds to hire contractors to build their vision.

Depending on the amount of work required on the property, as-is buyers may need to relocate for a period of time. If home repairs require new roofing, flooring or altering the foundation, the buyers may want to find accommodations with nearby family or at a hotel. Ideal as-is homebuyers may have no intentions of living in their purchased properties and instead plan on flipping homes to sell for a profit.

What are some tips for as-is homebuyers?
For buyers ready to take on a challenge, as-is properties can be rewarding investments. When making an offer on an as-is home, buyers should understand the risks and strategically plan how they are going to renovate and repair the dwelling. Drafting and maintaining a budget can prevent these investments from becoming money pits.

Buyers should plan a home inspection to get a professional opinion on its condition. This process occurs after buyers make an accepted offer. According to Bankrate, most states have mandated that home sellers inform buyers of what they know about the home's conditions. Banks selling foreclosed properties are not required to follow these disclosure laws, as they never resided in the home and do not have information regarding what shape the property is in.

For more information about this article, call 866-614-5959.

Home inspections and home appraisals are both important steps in the selling and buying processes.

Home inspection vs. home appraisal

During the purchase process, homebuyers will typically encounter home inspections and appraisals. First-time buyers may conflate these two processes, but they serve different purposes and provide insight to distinct parties.

Home inspection
Home inspections involve in-depth evaluations of properties as part of the home sale process. According to a poll from the American Society of Home Inspectors, 72 percent of homeowners in the U.S. believe the home inspection process helped them steer clear of potential complications with their current homes. Inspections provide details about the conditions of the property, specifically regarding any problems that may be costly or unsafe.

Homebuyers are responsible for paying home inspectors. The New York Times suggested that buyers have the inspection before making a bid or make the offer contingent on home inspection results.

Home inspectors typically assess the physical and internal structures of the home. This evaluation includes the plumbing, foundation, walls and insulation, among other critical features. Buyers should try to be present for the home inspection to learn more about their potential homes and ask the inspector questions about problems that may arise.

After the inspection, home inspectors will send homebuyers a full report. This report includes the severity of each issue, as well as the approximate costs of fixing them. If these problems are too much for buyers to handle, they may decide to not follow through with the sale.

Home appraisal
This assessment is one of the first steps in the closing process. A home lender sends an unbiased professional to come to determine a property's value. Lenders want to make sure the loan amount aligns with the valuation.

When appraisals are lower than homes' purchases prices, lenders will loan only the appraised amounts. If this occurs, sellers could lower their asking prices, or the buyers need to make a larger down payment.

According to Realtor.com, a variety of factors contribute to home appraisers' evaluations:

  1. Location.
  2. Size of lots.
  3. Square footage of homes, including the number of bedrooms and bathrooms on the premises.
  4. Condition of the home.
  5. Sales trends of properties in the same neighborhood or with similar features.
  6. Home amenities, like pools or patios.

If sellers believe the appraisal is too low, they may want to consider the amount of foreclosures in the area, as distressed properties can lower homes' values. If this is the case, sellers may be able to persuade the appraiser to re-evaluate the initial estimate. Sellers are responsible for paying for home appraisers.

Despite their similarities and differences, inspections and appraisals are both important for home sales. All homes must go through the appraisal and inspection process before they can be passed along from sellers to buyers.

For more information about this article, call 866-614-5959.

These tips will help first-time homebuyers figure out how much home they can really afford.

How much home can I afford?

Many websites have quick calculators to estimate the amount a homebuyer might be able to spend on a home. Yet, these algorithms produce more of a ballpark range than an exact measure. This is because there is more to consider when deciding how to finance your home than simply income and home cost.

When planning how much to spend on a home, there are many factors for homebuyers to think through, including typical spending habits and unforeseen events. Here are three you'll need to consider:

Debt-to-income ratio
Many lenders use a rule of thumb to assess a buyer's finances and determine how much they are able to spend on a home, according to Zillow. This rule, aptly nicknamed the 28/36 Rule, dictates that a mortgage payment should not exceed 28 percent of a buyer's pre-tax income, and their debts, including the mortgage and other debts, should not exceed 36 percent of the pre-tax income.

These ratios vary among lenders, and can also vary based on credit score or loan type. But this handy trick can be especially helpful for buyers trying to determine their financial capabilities prior to consulting with a lender. 

Don't forget to think long-term
While debt-to-income ratio is one of the first things a homebuyer will hear when discussing a new home with a lender, that ratio only represents where a buyer's finances stand now, NerdWallet warned. The ratio does not predict or account for where a buyer might be a few years into the mortgage.

It's important for homebuyers to remember future expenses that come alongside buying a home: maintenance and repairs, furnishing and appliances. Not to mention other life changes that decrease cash flow such as job loss or having children. 

Sweat the small things
Any homebuyer's primary concerns when it comes to affordability will be the mortgage, the down payment and any loans involved. These are, of course, primary factors in determining how to finance a home, and what home a buyer is capable of affording. But there are many other factors, Zillow noted, that may be overlooked.

Interest rate is an important aspect of the home-buying investment. The amount of interest can greatly affect the mortgage rate a buyer is able to afford, so it is important to read all the fine print when looking at prices. Another important consideration is lifestyle. Sure, a buyer might be able to a afford a certain home, but will they be able to continue their preferred lifestyle and spending habits once the bills roll in? It's always important to err on the side of caution when buying a home, Bankrate noted, so as not to end up stuck between a rock and a hard place.

For first-time homebuyers, it can be tricky to figure out an ideal spending range. Though there are straightforward tricks to help get an idea of the best cost range for a given income, lifestyle factors and future possibilities should always be considered in the budgeting process.

For more information about this article, call 866-614-5959