Rieger Homes has been a leading home builder in the Mid-Hudson Valley for over 50 years. We are a family owned company under its second generation of leadership and are committed to building a successful relationship between our family of professionals and your family. Our goal is to assist you and your family in building a new home of your dreams. We hope that this series of articles helps to make your home purchase an exciting and memorable event.
The first step in an organized home search is to determine what you can afford. It just makes sense to know your price range before you fall in love with a home that is out of reach. There are many tools that may assist you during this process, and people to help, but it all starts with gathering your financial information.
1) Put a list and file together with all your income (salary, alimony, child support, rental income, dividends) and a separate list and file with your debts and expenses. Your debts include car loans, student loans and credit card debt. Expenses include car leases, monthly bills, regular credit card payments, alimony or child support, utilities and other expenses that occur on a less than monthly basis like insurance. If you are not sure where you are spending, take a look at your check book or your bank statement for the past 6 – 12 months. The more thorough you are now, the easier the next step will be when you apply for a mortgage pre-approval.
There are several different ways to roughly determine what you can afford.
a) One traditional rule of thumb is you can afford approximately 3 times your gross (before taxes or debt) income. While this is quick and easy, it may or may not work for you depending on how much debt you hold and the size of your downpayment.
b) Using a ratio of monthly gross income to monthly payments of principal and interest may be more helpful. This is the process a bank or mortgage company uses. Please contact your bank or financial adviser for current ratios in your area.
c) Prepared with your financial information, go to a site with an affordability calculator, like www.realtor.com.
2) Determine how much you will use as the down payment on the home. The down payment amount you are able to contribute also plays a prominent part of your home purchase.
a) The larger your down payment, the lower the monthly mortgage payments will be. If you have a large down payment you may able to afford a higher priced home.
b) If the down payment is 20% or higher of the purchase price, you can avoid PMI (private mortgage insurance). PMI is a fee for an insurance policy that protects the bank and is added on to your monthly payment.
3) Check your credit score. If you haven’t before, now is the time to check your credit report and know your credit score. If you pay your bills on time and don’t have a lot of loans, you are probably OK; however, the reporting agencies can make mistakes. Now is the time to clear up any discrepancies and fix any problems. The bank will run a credit check as part of your mortgage loan process and you would like it to be as clean as possible. The higher (better) your credit rating is, the easier it will be for you to qualify for a loan. The large credit check services are Experian, TransUnion and Equifax. These services’ sites also contain helpful information and advice on credit scoring and reporting. One place to obtain a free credit report and advice is www.annualcreditreport.com.
Please remember that in addition to the monthly house payment, you need to include real estate taxes, homeowners insurance and possibly PMI. You will also have to budget for closing costs, which can vary by loan type. Your banker will give you a better idea of how much closing costs will be for your specific loan later on in the process.
After going through these exercises you may determine that you are ready to move forward and continue on the journey to home ownership or decide that you need to work on your down payment or credit report. Whichever path you choose, we would love to be your builder. Check back to view our available homes, communities and for our take on the next step to enjoy home buying. Good luck!
If you decide that a new home is the right move for you, it is imperative to examine the history and reputation of the builder and the developer. If you are buying a new home in an existing community, talk to the homeowners who already live their and get their feedback. Honest feedback is your best tool when searching for a new home. If the home you are considering is in a brand new community, seek out other communities that the builder has built. Talk to those homeowners and get their views on the quality of the construction, the professionalism of the builder and the nature of the neighborhood. This type of information can be of great assistance when seeking your new home.