September 20, 2007
By Cam Nowlin
Contact: 512-698-7910
Texas Southern Lending
Houston Mortgages
Home ownership is more than trading your rent payment for a mortgage payment. Owning a home involves a great deal of responsibility, and we all know that another way to say "responsibility" is "money." An essential part of becoming a homeowner is understanding how much 'responsibility' you can handle. Look at these tips from your Houston Mortgage Broker Cam Nowlin:
Don't Fall in Love
It's very easy to fall in love with a house, especially when you've been living in an apartment with leaky faucets, old carpeting, and upstairs neighbors who host clogging parties. Understandable. Home is a powerful concept, and it would be callous to pretend that buying a house is nothing but a business investment. There’s a reason it’s part of the “American Dream.” It’s about independence, freedom, and so many other intangibles that give you happy little “this could be MINE” goose bumps.
But let's be callous for just a minute. No matter which house captures your heart, there are more just like it, promise, maybe even right across the street. Letting your dream house go would be a temporary setback, one that will be remedied the next time you fall in love with a house. Spending more than you can afford or being willing to overlook expensive repairs, however, are mistakes that will be with you for a very long time. Before you go gaga over a house, you need to know what’s in your league and what’s not. It’ll save you some heartache and prevent you from getting all excited about a house that’s much more than you can afford.
Figuring Out How Much You Can Afford
One way to help make sure you are shopping in the right price range is by pre-qualifying for a loan. Pre-qualification through your Houston Mortgage Broker provides you an idea of how much you might be able to borrow based on your stated income, assets and liabilities. Keep in mind, however, that this range is often a lot higher than you’ll really want to spend. You’ll know what we mean when you see the numbers. Sure, you could afford that much if you never eat out again, start making your own clothes out of curtains, and forgo family vacations.
So sit down with your prequalification numbers and give them a good realistic trimming that takes your actual budget and lifestyle into account. If you’re currently making a $1,200 rent payment and living a lifestyle you want to continue or improve upon, consider how "pre-qualifying" for a $3,000 mortgage payment would cramp your style. Once you’ve settled on a price range you’re comfortable with, you can ask your Houston real estate agent to narrow down the list of potential homes to those you can actually afford.
Some buyers confuse prequalification with mortgage pre-approval. This is a more rigorous procedure in which the lender verifies your information, checks your credit, and makes a commitment to provide the loan. Some pre-approvals also come with a rate lock, which greatly simplifies the process of shopping for a house and making an offer. When you write an offer for the purchase of a home with a letter of pre-approval from the lender, it makes for a much more attractive package to the seller because they can be confident your loan won't fall through. It’s a good idea to have the pre-approval letter from your lender custom written with the actual number you’re making the offer for. The maximum amount of your pre-approval is a number you’ll want to keep close to your chest. Don’t tell anyone, don’t tell your mother, and certainly don’t tell the seller. You’ll erase any bargaining power for a lower-than-asking-price offer if they get wind that you could pay more if you wanted to.
The Cost of Home Ownership
Once you own your home, you may develop a new appreciation for your former landlord. In addition to a monthly mortgage payment, you'll also be responsible for taxes, maintenance, utilities, and insurance. You may have expenses you never even thought about before, such as snow removal, lawn care, sidewalk repairs, chimney sweeping, drain snaking, exploding appliances, or a basement full of water. All of these "'responsibilities'" can and do add up to a lot of money, even if your home is brand new (or especially if your home is brand new). It's absolutely crucial that your monthly budget includes an allowance both for regular monthly expenses and emergency repairs. Also consider budgeting for an emergency fund so you can keep up with mortgage, taxes, insurance, and all sundry expenses if you should happen to become unemployed for a period of several months.
If all of this sounds discouraging, consider how many people do jump all of these hurdles and make the transition to home ownership. Painful as it may be to get up in the middle of the night and call a plumber, or to suddenly shell out hundreds of dollars for an increased tax assessment, most people find that building equity and being the king (or queen) of one's castle makes it more than worthwhile.
