Part Two (2) - Best Way to Buy a home - The Affordability Factor
Santa Clarita real estate experts present our Part Two - (2) of our Best home buyer practices. This is Part Two which is my Affordability Factor. What can you afford when it comes to buying real estate.
This has to do with the home price ranges that you will be concerned with. Does your "affordability factor" limit you to a specific type of home? Are you going to be limited to condos/town-homes or will your price point in the area in which you desire to buy open you up to Single Family Residences and Luxury Estates?
That depends on something that I call "Affordability Factor".
This is very different than your pre-qualification amount. When you are going to need to borrow money to buy a home, you typically are going to be dealing with some type of real estate lender.
They come in various forms, maybe the lender is going to be your parents :)
Most don't have parents that can loan the amounts that real estate costs in the Santa Clarita Valley, so hence a more traditional lender are going to be necessary.
As part of your pre-qualification, you will be given an amount that you are going to be approved for.
Remember this, that amount - your pre-qualification amount may not be comfortable for you to make each month.
That is because that amount is not the only thing you are going to be paying as a homeowner. There are other fees and charges which are necessary to pay as a new homeowner. Here are a few of the fees that you need to size up in conjunction with your mortgage payment.
- Utilities, Cable, Internet, Water, Electricity, Gas, Trash - may be where you were staying the utilities were included - such as water and trash being included at various rental complexes or usually at mom and dads.
- Property Taxes - In Santa Clarita Valley you will have to pay approximately 1.25% per year of the assessed value. If there are Mello roos taxes - that is additional.
- Homeowners Association Fees - Some will have this fee, if you are buying in the Santa Clarita Valley, most will have this fee - depending on the area. It Varies $50-300+ a month.
- Lawn / Pool/home maintenance - these are recurring monthly fees that occur with regard to some homeowners.
- The deductible saving fee - Just in case, it gives security when you have an account designated for paying your homeowners deductible if something happens where you have to engage your home insurance due to something occurring.
- Home Warranty - After the first year, if your agent asked to have the seller pay for a home warranty policy, you may want to have this continue. You can pay for the entire year or expect to pay the monthly payments on a policy.
These amounts can add up and could lead to some unexpected hardship during your monthly bill paying venture. It's best to factor them in and adjust your home wish list accordingly.
We have our first meeting in our offices which is the Sit Down for home buyers. It so happens to be part 1 in our Best home buyer practices series - the Sit-Down.
Connor with HONOR (00:00):
Welcome to part two of our series. The best way to buy a house that also includes condos, townhomes, I'm Conner, MacIvor, Santa Clarita, home experts.com. Please check out our website. Hit me up when you're ready to have your real estate one here in the Los Angeles area and Santa Clarita Valley. Now part one we talked about that. Sit down, that all-important meeting that's gonna save you a lot of time and money. So that's the first part, part one. If you haven't seen it, you hit us up on Instagram and of course go to our YouTube channel STV moves. So please check that out. Now part two has to do with the affordability factor in real estate. It's often something that is done after you go speak with a real estate lender and that's fine as long as you haven't committed to anything because this is really, really important for you.
Connor with HONOR (00:45):
Homebuyers out there, whether you're a veteran home buyer or whether you're a brand new home buyer, first-time buyer. So this has to do with what you can afford versus what you can qualify for. Part three of our series. We're going to do a lender episode that's going to talk about loans and lending and how to get your best deal on that, so stay tuned for that. But part two, your affordability factor, what you qualify for. That's what the lender says. The amount of money you can spend on a house within your entire financial picture, tax returns, all of your deductions, that 10 commercial, all that fancy stuff, that's what they say you can buy a house for. Now, if you're living with mom and daddy, you're renting. Maybe some of your utilities are being covered maybe into your rental. There's an HOA in place and the landlord is taking care of that.
Connor with HONOR (01:32):
There are other things though you need to think about, so look at your total profile with purchasing this property. Let's say the lender qualifies you at half a million dollars or $500,000 maybe once you look at that payment, you're comfortable, but then when you start adding things on like taxes and insurance, property taxes, insurance, maybe there's a [inaudible] tax. Maybe there's a homeowners association looking at your utilities. Maybe you don't pay water currently at where you're living, but now you're going to start having a water bill. Looking at those things, the maintenance on the property, those types of things. That's going to help you establish your affordability factor, so maybe at half a million dollars. That's going to be a little too rich for your blood at this particular point in life, so you can step it back to four 50 or 400 but look at those numbers and check your affordability factor versus your qualification amount.
Connor with HONOR (02:23):
Then when you do find that number that seems to work out best for you within what you can afford, that's the real estate you need to be looking at plus or minus 10 or $12,000. It's going to depend on price range and your consummate real estate professional should be able to give you an idea of how much flex there is in the market. It's a seller's market. There might not be much, there's more inventory and it's a buyer's market. There might be more so that's going to allow for your higher searcher lower church. I've caught her mic. Iver, Santa's trade home experts. Thanks for watching and hit me up when you're ready. Be safe. Over and out.