10 Step Home Buying Guide – 1. ESTABLISH A BUDGET
Buying property is a HUGE deal! It’s likely the single biggest purchase you will make in your lifetime. The first step is to establish a budget and to do that you have to step back and look at your big picture. What does owning a home mean to you? How do you see yourself and your family living in the home? Is this your 5-year home or your forever home? What other activities and hobbies do you want to also continue or cultivate after you buy your home?
These are all really important questions to ask yourself and the answers will help you decide how much or your monthly income you are willing to contribute to a mortgage and household expenses regardless of what a lender eventually approves you for. Expect your PITI (principle, interest, taxes and insurance or total house payment) to be at least 30% of your monthly income or more. Find more details about the actual cost of owning a home from this great SF Gate article.
Renting vs. Buying
Replacing rent with a mortgage has tax benefits and in the end will save you money and allow you to put that money towards paying your mortgage and building equity instead of someone else’s. Your PITI is a set monthly amount while your rent is subject to annual increases and if your not protected by rent control could spike suddenly and dramatically.
Make sure that your PITI (principle, interest, tax & insurance) fits in with the rest of your lifestyle. Once you are comfortable with an amount contact a lender to find out what your buying potential is. The lender will request financial information, taxes and pull credit reports to help establish a budget and provide you with a pre-approval.
Reminder of the 10 Steps:
- Establish A Budget
- Engage Your Marin Modern/San Francisco Modern Realtor
- Obtain Loan Pre-Approval
- Preview Homes
- Make an Offer
- Negotiate towards ratification
- Inspection Contingency
- Appraisal/Loan Contingency
- Sign/Fund/Close or Record
- Collect the Keys and Enjoy!
note: this is part 2 of an 11 step series on buying a home. If you missed the intro check it out: 10 Step Home Buying Guide
Now you are ready for Step 2 – Engage your Marin Modern/San Francisco Modern Realtor. Coming soon…