I am not a real estate agent nor something expert on the housing market but I can share my experience of finding a property in a consumer point of view. Getting a property can be excited and that is the dream to a lot of American but there are things that you should need to consider:
First things first. What is my budget? Can I afford to get a six-dollar burger or just want to pick something from the dollar menu. No one knows better than you do. As of the moment of writing this post, the 30 year fixed rate is 3.875%. Based on this interest rate, the estimate payment comes up with $500 for every $100,000 that you borrow. For example, if your loan amount is $400,000, your estimate monthly mortgage payment would be $2,000 plus 1.25% property tax which comes up total $2,416 per month assuming you are getting a conventional loan which is paying 20% down payment.
So how much am I qualify to get, there is no exact answer until you ask your lender but normally, lenders are based on your income to calculate how much they will lend you or should say how much one’s can afford. Usually the monthly mortgage payment won’t go more than 41% of your monthly gross income. So…for example if your monthly gross income is 10,000, theoretically you can afford to pay max $4100 monthly and like I have mentioned earlier, $500 for every $100,000 loan, $4000 which is equal as a payment for a loan of $800,000, follow?
So now you have a basic idea how much you can afford and let’s move on…
This is one of the most important factors to reflect the value of a property. The better the location the more valuable the property could be, simple as that. But the question is what location is consider a good location, here is a simple check list.
1. Don’t stay too close to the freeway or right by the street that is always high in traffic to avoid all the annoying noise.
2. Easy assess to all the grocery, market, school, freeway and places are always desirable.
3. Go online and do some research about the neighborhood. Things that you should look at such as household income, crime rate, weather, demographics etc. You can find all these information from www.city-data.com, a very informative website tell you the real estate, relocation info, house prices, income etc.
4. There is one thing that I always ask myself: Should I get a nice house in a so-so area or a so-so house in a good neighborhood? In investment point of view, the answer is pick one in a good neighborhood even the house is not so delightful. The reason is because house price is always depends more on the location than the cosmetic factors such as the interior design etc. assuming the property is in an average condition.
5. Usually a city with a good school district reflect in its house price and they are always proportion to each other. In Southern California, good neighborhood such as San Marino, La Canada Flintridge, South Pasadena etc. They all have a distinct school district and their house prices go over the roof. Make it really hard for some people to afford.
Now you have a set budget and knowing what cities you are looking for, next is to find a loan agent (broker), getting a pre-approval and have a real estate agent to work with you to find your dream home.
Buying a new home can be excited but also it is a time consuming process and loads of work need to be considered. I have seen people like me myself getting our new home back in a day in less than a month and I have also seen some people spending over 3-4 years doing research and checking out over 100 of houses in order to get their final one. This is totally fine and the point is at the end of the day, you will the one who actually live in to the house, so you got to make sure you are 100% satisfy and don’t rush yourself because of whatever reasons.
You can also read my other article “How to Pay Off Your Mortgage Early?”
Good luck to your next house hunting!