Updated 1/30/07
Buyer's Frequently Asked Questions
Q. We are moving to San Antonio but don't know how long we will be there. Should we buy or rent a home?
A: Good question and one that you really need to think about. This particularly applies to those of you in the military or have professions which require you to move frequently. Although the military doesn't move its people around like it used to, staying in one place for a long time doesn't happen very often. Having spent a bunch of time in the Air Force moving all over the place, I can relate to having to pack up the family and dog, get in the car and go someplace else to live.
My personal general rule of thumb is unless you know you are going to be here for at least two years, renting a home might be best for you. If you are going to be here longer than two years, consider buying a home. Buying can be cheaper than renting. When you make improvements to a rental home such as painting, hanging wall paper, etc., you have made your landlord's house look better. But when you make improvements to a home you are buying, you have done so to your property and possibly increased its value.
So...do you need to buy or rent? Like most of my comments below....depends on a lot of variables. That's why you should work with RealtorsŪ like Tim or me. Tap into our knowledge so that you can make a good decision.
Q: What will my monthly payment be?
A: As a "general rule of thumb" your payment will be 1/100th the amount of the loan. Example: if the home costs $80,000, your payment will be approximately $800.00 per month. If it costs $95,000, the payment will be close to $950.00 per month. This "monthly payment" includes your taxes and insurance payments. Of course, there are a lot of variables to calculating payments. Variables may include such things as the current interest rate; type of loan; amount financed, etc. This example is only one of many. Your payment may be higher or lower depending on the variables.
Q: How do I know if I qualify for a loan?
A: This could get complicated because there are a lot of variables. The normal requires a steady income, good credit and acceptable debt ratio. Using FHA and VA criteria as an example for debt ratio:
- Add up your total combined monthly gross income (before any deductions such as taxes, etc)
- Multiply by 41% (i.e. $3,000 x .41 = $1,230). 41% is the normal. Depending on a number of factors, sometimes it can be raised higher.
- This gives you a total allowable debt per month (including the new house payment) according to FHA or VA guidelines.
- Add up your current monthly debts. Include minimum payments on credit cards, car payments, bank loans, student loans, child support, any other debts you may have. Don't include insurance premiums, electric bills and such. Just "debts". Deduct the total from your allowable debt amount. The result is how much house payment you can have. This is a very simple example and is only a starting point. Again, there are a lot of variables in obtaining a home loan. Sitting down with a loan officer and getting qualified is the only way to see if everything fits.
Q: Should we buy a new or pre-owned home?
A: It depends...(good answer, huh?). Giving a complete and thorough answer to this question would require me to build another web site.
New and pre-owned homes have positives and negatives. Deciding on a new or pre-owned home is one of the biggest decisions you will be making. It is important that you know what your options are and have a good idea of what is available in both categories.
- New homes are just that. Things are new with warranties and some "peace of mind" the home won't require any repairs in the near future. Usually you get to pick the style and colors of such items as flooring, cabinets, siding, brick, exterior paint, etc, and maybe make a few minor modifications to the structure. Most builders have an abundance of upgrades available so you can customize your new home. Normally you get to select the lot on which the home is to be built. The downside....I hope you like yard work. Usually there is no grass in the back yard and trees/shrubs are few, if any. Hidden costs include having to buy mini-binds, curtains, ceiling fans, etc. These little "extras" can add up quickly. I frequently hear the comment "The neighborhood is not established yet." Expect to wait from three to five months while your new home is being built.
- Pre-owned homes are usually ready to be moved into. You can close, get the keys, move your stuff into the home and you are there. That patio in the back yard is ready for the bar-b-que; the yard is ready for the kids and dog and the window coverings are in place. A lot of pre-owned homes already have upgraded features in place. It's an instant home. On the other side, the home is "used" and comes with some questions such as "how good is the air conditioner...is the hot water tank okay?" I highly recommend you have the home inspected before you buy (which gives you a good idea of what you are buying), but remember...it is not a NEW home.
Obviously, there is no clear answer to "new versus pre-owned." Many factors must be considered before you sign on the dotted line. Viewing both new and pre-owned homes will greatly help you make a confident decision.
Q: Why should I use a RealtorŪ and how much is a RealtorŪ going to cost me?
A: With a purchase as BIG as a home, why would you go into it without being represented by a licensed professional? Buying a home is NOT like buying a car. If you added up all the people involved in your buying a home, the total would probably be close to seventy-five! Title companies, lawyers, loan officers, inspectors, appraisers, repairmen, clerks at the court house...a bunch of people! And...the one person who will get you through all the paperwork and negotiations...your RealtorŪ.
How much does using a RealtorŪ cost you? All RealtorsŪ regardless if they work for the seller or the buyer, get paid for by the seller. When the listing agent took the contract with the seller to put their home on the market, they signed an agreement that the seller would pay a percentage of the total sale price to the Listing Broker. They also agreed to allow Buyer's Agents to show and sell their homes and understand the Buyer's Agent represents the BUYER. Unless you have entered into a separate agreement to pay for your own Realtor...that's the way it is. As a Buyer's Agent I will be representing you...not the seller.
If you have questions, feel free to send me an email
Gary Prendergast is a licensed RealtorŪ with Best Homes GMAC Real Estate
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