One of the most common reasons homeowners become “house poor” is they don’t realize the true cost of owning a home. It also doesn’t help that lenders often pre-approve homebuyers for a higher amount than they can realistically afford. When poring over homes for sale in St. Helena, CA, it’s essential to keep in mind other ownership costs.
Along with talking to an experienced real estate agent, these four steps and strategies will help you purchase a great home at a terrific price while avoiding common pitfalls many buyers make.
As a high end real estate company, we understand there’s more to buying a luxury property than its selling price. Buyers crave unique amenities and features in beautiful neighborhoods and want to know they’re making a smart investment.
Here’s how to keep the process exciting and rewarding while not maxing out your available funds.
Lenders run calculations to determine how much mortgage they believe you can afford, but you’re the only one who truly knows how much you spend per month on your lifestyle. Some people forget to factor in expenses lenders don’t always ask about, such as taking care of older parents or out-of-pocket healthcare costs. Or you might love to travel or dine out often. Unless you’re willing to adjust your current lifestyle to accommodate a large monthly mortgage payment, plan on keeping your monthly outlay at no more than 25 to 35 percent of your pre-tax income.
Downpayments can be significant upfront investments, ranging anywhere from 3 to 20 percent of the home’s purchase price; most conventional mortgage loans require 20 percent. Closing costs include everything from appraisal fees to title insurance and are typically three to six percent of the total purchase price.
Utilities, maintenance, moving costs, renovation and redecorating expenses, and property taxes are just some of the expenses associated with owning a home. If your down payment is less than 20%, you’ll also pay up to 1% more for private mortgage insurance (PMI). If you live in a community with a homeowner’s association, factor in the monthly fees that cover security, maintenance, and other amenities.
Fortunately, there are plenty of online calculators that can help you quickly determine how much house you can comfortably afford. Only you can decide how much you’re willing to put into owning your dream home. But keep in mind that if you take too aggressive an approach and end up house poor, you could find thoroughly enjoying life in your new home challenging.
When you partner with a high end real estate company like ours, you can feel more confident about your investment decision. The agents at St. Helena Real Estate know the local luxury property market inside and out and can help you analyze which property meets your desires and budget. To learn more, contact us today!