Tag Archive for: Home Affordability

The most important things for homebuyers to consider when purchasing a home are:

  1. Being able to afford a home based upon one’s situation in life
  2. Not over-paying for a home based upon its market value
  3. A home’s location – What do the neighborhoods, school districts and surrounding area look like?
  4. A house’s age and the age of its components

Notice how security is an aspect you can’t ignore with the prospect of purchasing a home. It’s only natural to have hesitation about buying a home as it’s a big investment. Furthermore, feeling a sense of security goes beyond the financial commitments, which are required from buyers as they move forward with their purchase. If you lack security, you’ll be without peace taking another step toward homeownership. It’s also important to note that three of these four considerations listed above directly relate to money.

Tops on the list is paramount, because if your circumstances in life won’t allow it, you can’t or perhaps shouldn’t purchase a home. Home affordability comes in all shapes and sizes. What might be affordable to buyer A, isn’t feasible to buyer B. Being able to afford a home relates to the ability to budget properly for each and every cost associated with the purchase. Your debt-to-income ratio might be the surest way to prove to yourself as well as a lender, you’re able to follow-through with a home purchase. Besides your debt-to-income ratio, you should also reflect upon how much of a mortgage you can afford? You may be approved for borrowing a certain sum, but that doesn’t necessarily mean you should take on that loan. The underwriters who dabble in rating an applicant’s ability to purchase will ultimately examine a buyer’s gross income, outstanding debt, assets and liabilities. They’re going to probe to see what demands have been placed on the buyer’s income. They’ll also forecast, as best they can, to ensure the bank’s ability to get paid back in the future isn’t at risk.

Secondly, buyers and sellers have been more cautious with the drastic increases in home appreciation since the onset of the pandemic. While the pandemic has vanished, home prices continue their upward climb. Since the beginning of COVID, when real estate sales were restricted, home prices have risen 54.8% in the Greater Scranton market.* A market recently named as the most affordable in the country. Again, while there are sales to be had right now, in fact we’re entering a time of the year where homebuyers will discover some of the best premiums around, buyers should exercise prudence. How long do they intend to live in the place they’re thinking about buying? Their offering on a property may not align with its value and might place undue hardship on the homeowner, if they need to sell a few years after their purchase. We would recommend living in a home for at least seven or more years at the risk of taking a loss. Though homes are generally a solid investment, there are no guarantees. If you need the freedom to move at a moment’s notice, within a shorter time frame from when you purchased the home, you might want to refrain from buying until your circumstances change.

For some buyers, a home’s location is the first litmus test it must pass. If the setting isn’t appealing or the property – though it has virtually everything the buyer is looking for – is in a non-ideal section of town or the purchaser has a family/children and thus schools are high on their list, then it’s hard to overlook locale. We would suggest reviewing pros and cons of various listings as it relates to their whereabouts. You can’t change their bearings, so start there and rate how important distances to work, school, daycare and shopping are, for instance. Look into traffic patterns and noise levels in particular parts of town. If school districts are important to you, target homes in the districts you would prefer to live. Scope out the home’s surroundings. Catch a glimpse of the area on the weekends, during the week, day and night. Is the neighborhood kid or pet friendly? Is the home in a walkable community?

Finally, the vast majority of homebuyers aren’t acquiring a new or newer construction home, one that’s less than ten years old. Being that many buyers are moving into a house that has been around the block, we’d certainly recommend a home inspection as a contingency to the purchase. Besides that, over time, a home’s elements begin to display patterns of behavior and likewise, deterioration. What parts of a home should you keep your eyes on? Windows, roof, HVAC (heating/cooling) system, foundation, to name a few, but again, call in the professionals, such as a reputable home inspector. They’re more than capable of assessing the age of a house’s components/appliances. A few decades after the construction of a home, repairs become more common, and thus as a prospective buyer it’s important to understand what your yearly maintenance/repair costs might resemble.

 

* Greater Scranton Board of REALTORS® stats; median homes sales for March 2020, October 2022

Avoid These 7 Homebuyer Mistakes

So, you’ve decided it’s time to buy a home. Whether you’re a first-time homebuyer or not, your goal is likely to end up with a property you love at a price you can manage. Achieving this requires not only knowledge (it really is power!) but also a clear focus on your goals and local market insights. Avoiding common homebuyer mistakes can save you grief and prevent unwelcome surprises down the road.

Surprises in real estate are rarely welcome, and we’ve gathered seven common homebuyer mistakes to help make your experience smoother and more enjoyable.

1. Neglecting to Shop Around for Lenders & Mortgage Brokers

Many homebuyers make the mistake of settling on the first lender they find, but this can be costly. Speaking with multiple lenders and consulting a mortgage broker can help you compare loan terms, rates, and fees, ensuring you get the best deal. Additionally, getting pre-approved with a reputable lender is crucial; without it, you risk losing out on homes in competitive markets or falling in love with a property beyond your budget.

2. Misjudging Affordability

It’s easy to get carried away with excitement, but affordability is key. Home prices have risen in many markets, and it’s essential to budget realistically. Review your monthly expenses—auto loans, student debt, groceries, childcare, etc.—to determine what you can genuinely afford without financial strain. Avoid overspending based on emotional impulses, as it can put you at risk of losing your home if financial challenges arise. Your budget should guide you, and give yourself some room for unexpected costs.

7 Mistakes Homebuyers Must Avoid

3. Overpaying for a Home

Overextending on a home is rarely advisable. Though no purchase is foolproof, getting an accurate sense of a property’s value is essential before making an offer. Don’t rely on government valuations alone; instead, look at comparable sales data from recent months. A REALTOR® can help you determine a fair price based on the property’s true market value and comparable listings.

4. Skipping a REALTOR®

Homebuyers often think they can navigate the market on their own, but an experienced REALTOR® is invaluable. They represent your interests, connect you with inspectors, recommend trustworthy lenders, and provide insights into neighborhoods. They can help you avoid homebuyer mistakes, guide you on price offers, and advise on inspection outcomes. Finding a REALTOR® who aligns with your needs and communication style can make the process smoother and more informed.

5. Ignoring Credit Constraints

Boosting your credit score and saving for a down payment can take time, but it maximizes your buying power. Start by paying down existing debt, saving three to six months’ worth of expenses, and ensuring you don’t drain savings on a down payment alone. Once pre-approved, keep finances stable—don’t open new credit lines, close existing accounts, or make significant purchases before closing.

6. Overlooking Location and Structure

While cosmetic details can be changed, factors like location and structural aspects cannot. Keep an open mind about aesthetics, but prioritize the home’s location, yard size, and layout. Research crime rates, school ratings, and traffic patterns. Avoiding homebuyer mistakes like ignoring the neighborhood vibe or practical layout considerations can prevent long-term dissatisfaction.

7 Mistakes Homebuyers Must Avoid

7. Forgetting About Hidden Ownership Costs

For first-time buyers, ownership comes with added costs. Taxes, insurance, HOA fees, repairs, and utilities can add up. It’s wise to budget 2-3% of the home’s value for annual upkeep. For example, a $250,000 home might need $5,000-$7,500 per year for maintenance. Knowing these hidden costs upfront can keep your finances on track.

Make Informed Choices

Buying a home is a major life event, but keeping these potential homebuyer mistakes in mind will prepare you for a successful purchase. Focus on your goals, communicate with your REALTOR®, and decide if now is the right time to buy or if renting might be more prudent. Discuss your needs with a real estate professional to ensure a smooth and informed process.

For more homebuyer tips and FAQs, visit our website. We’d love to hear your feedback!