Real Estate Information Archive

When you become a homeowner who just made one of the most expensive purchases in your life, you are starting out on an exciting new adventure.  You just bought a great home in Baton Rouge, Prairieville, or a nearby city and you are now  surprised to realize that you are pretty much on your own in learning to be a homeowner.  If a major system goes wrong, you may have recourse, especially if you have a homeowner’s warranty, but that’s only one of the challenges.  Here are some tips to keep in mind to help you make the transition.

When you rented, whether there was a leak in the room or a window didn’t open, you called the landlord. (You may have even mumbled aloud that the problem wouldn’t have happened if he had only done some preventative maintenance.)  Now, you need to fix what’s broke and plan ahead.  Aside from anticipating possible repairs, you need to schedule time to mow the lawn, fix the screens, and clean the gutters.  If you don’t have the time, money, or interest to do these things or hire them out, then perhaps a condo would have been a better choice for you.

If you are like most new homeowners, you will want to make a million changes in your new home to make it yours.  These projects range from painting to adding an addition and everything in between.  If you are qualified to do these things, great, you can save some money.  If not, depending on how much is involved, you can learn to do many projects.  For major projects involving plumbing, electrical, or major remodels, you are better off hiring a licensed contractor.  It’s safer, often cheaper, and more likely to increase resale later in comparison to an amateur job.

When you got your mortgage you probably had to get homeowner’s insurance, to protect the bank’s interest, but buying a home is a good time to reassess all of your insurance.  The coverage on the home itself and on your possessions should include replacement value if you can get it, and should have high liability limits that can cover you if some litigation-happy person slips on your walk or is bitten by your dog.  You should also consider whether you have enough life and disability insurance to protect your partner and children in case of your death or illness or an accident that could limit your ability to work.  Even your car insurance deserves a look – minimum state limits won’t protect you enough if you are sued.

When you buy a home, your days of the form 1040EZ are probably over.  There are many deductions you can take as a homeowner, especially the first year; for other things, like improvements, there is no deduction until you sell.  Even if you usually do your taxes yourself, you might want to use a professional tax preparer the first year to make sure you take the deductions you are entitled to without over doing it.  Make sure to keep all your receipts on anything you do in the house so you can take the proper credit later.

Buying a home can be daunting experience but at RE/Max Excellent Properties, Sandy Ogburn-Sandlin and her team will prepare you for home ownership and follow up afterwards, as our testimonials attest. Sandy’s Team can show you new and resale homes in homes in the Greater Baton Rouge area that offer great values for first time buyers and repeat buyers available under the home buyer’s tax credit. AND that are right for you and your situation.

Once you’ve decided to buy a beautiful Prairieville home, the big question is  “How much house can I afford?”

You may already have a figure from the bank If you have gone to get pre-approval.  This may be more or less than what you had in mind. It’s only a starting point in your thought process.  The perception is that bank puts the upper limit on what you can spend, but the lender may not take into account everything you need to consider.

How Much Can You Afford?

Some lenders use different percentages to figure out how much should go for housing, but the most common guide to how much you can afford these days is based on the 28/36 rule.  The means your housing should be 28% or less of your gross income before taxes, while your debt (not including your mortgage) should be 36% or less of your income.  Based on an income of $60,000, you might be able to append about $1,400 a month on your mortgage, taxes, and insurance, but this would dip to $1,000 if you paid about $650 about for credit cards, car payment, and other loans.  (Click here for a handy 28/36 mortgage calculator to compute how the 28/36% rule would work out for you.)  Banks may use a magical formula based on your FICO score, but they are considering similar things: how your debt compares to your income.

With a household income of $120,000, your might be able to pay $2,800 for housing with no debt.  What if your spouse is laid off?  Do you have resources to help you make it for a while?  What if one spouse wants to stay home with the kids? What if your salary stays the same but your other expenses keep increasing?  Will you be able to handle increased energy costs if the home is bigger than your old residence?  A mortgage you can technically afford can become a noose around your neck.

Bottom line, you need to be honest with yourselves. If you are saving for your kids’ college or trying to keep them in private schools as well as number of expensive activities, a big house payment can cut off other life options unless your income increases.

Don’t Sacrifice It All For Your Down Payment

You can reduce the amount of the loan and the monthly payment by putting more money down.  It is a mistake to raid retirement funds ordeplete savings.  Experts say you should have three to six months savings on hand in case of job loss, plus about 5 % of the purchase price of your home as a cushion for emergencies and repairs.  In addition, you may need about 3-5% of the amount of the purchase price for closing costs and moving expenses. 

The last thing you want to do is buy a house that develops a leaky roof six months down the road that you can’t afford to fix.  You are better off putting down less down payment – even if that means you buy a less expensive home or consider FHA financing, as that requires a smaller down payment. At this time, it seems like that an extension of the first time homebuyers tax credit is likely in some form, so you can probably plan on some assistance for either your downpayment or other move-in expenses.

Since home price and interest rates low, this is great time to buy an affordable house – but not to overextend yourself.  Talk to Sandy Sandlin today about buying a Prairieville home  Sandy’s Team will give the most to date information about the status of the first time homebuyers credit, as well about the best properties in East Baton Rouge, Ascension, and Livingston Parishes.