Your Home Buying Price:
Avoid Hardship Down The Road

Job #1 The Home buying price process can throw you for a loop: Don't be "house rich and cash poor!"

I sell houses for a living, however “my job” is making sure my people keep the homes they buy!

I have seen many reasons why people “rationally” justify putting more money in a house beyond their price range.

Most of the reasons are later proved wrong.

I cannot over emphasize the importance of staying within your home buying power. Stretching it can bring you hardship later on.

Again, I am not talking with the ones of you that are buying “all cash:” you have my blessing if you have room to stretch a bit further. You already have the money and, God forbid, you fall a bit in your finances, you will not have to come up with the mortgage payment month after month for year on end…

And that is exactly my point in insisting with those financing their homes on the need to establish a home buying price point and stick with it.

The home buying process used to be “too” easy. Nowadays it is more realistic. And there is a great need for it to be so.

”Irrational Exuberance”

Did I scare you enough?

Please do not get me wrong: I am a firm believer that we all are going to get better, but I came to understand and respect one “law” of economics: ”We do not spend the money that we are yet to put our hands on.”

During the “real estate boom” everybody was counting to “make a killer” and they were buying the biggest homes, the most expensive ones and other superlatives… And everybody was acquiring houses ways beyond home buying price adequate to their means.

And they were building big too – they were nicknamed the "McMansions" – it all was part of the “irrational exuberance” and contributed to the “bust” that we came to inherit.

My goal is not to scare you, but make sure you understand the importance of staying in your comfortable home buying price point and not risk to loose it down the road.

As you fine tune your home buying price zone you may benefit to see my info on “Buying Power” page.

Stay Between The Lines

It is better for you to stay within your home buying price range.
It will not be “the perfect house,” yet, but it is the one that you will be able to afford for the foreseeable future while you:

•  Build equity
• Establish a more solid footing “home buying” credit track record
  
•  Build up a more solid credit scores
• If you are looking for house out of “your (price) league” you may be shooting yourself on the foot in two counts:
  a) you are loosing precious time to look for house that you can buy
  b) You will “educate your good taste” and house prices are higher for many good reasons, like large homes, better finish and/or better location. Builders do that on purpose so houses will be differentiate… Then it will be an unfair comparison coming back to your price range. It will be hard for you to "readjust."
• 8 to 15% higher is perfectly alright to expect some negotiation… and get it! However I would risk to say that 20% or above is hard to bridge the gap. There are exceptions to almost anything, I know…
  
• If you have cash or assets that can be readily converted to cash, then you are OK to look on more expensive houses.
  

However, if financing is involved, you will need to come up with a larger down payment. My experience has been that lenders will not finance another $1,000 above what they qualified you for.

First time home buyers while you are working on your home buying price, please you can apply for $100,000 in down payment assistance by visiting my page “ Home Grants”

Maintenance

Houses that resale well, at a higher price, are ones that have been well maintained and upgrade through the years.

And that, my friend, translates into continuing expenses that most buyers do not take into account at moment they sign on the dotted line to buy the home.

Ordinarily the maintenance of a home will anywhere from 4 to 8% of the price of the house per year! Ouch!

If there are special needs like size of the house, do consider another area not so much in demand, where prices will be more in your comfort zone.

Do Your Legwork

Even if you are working with a REALTOR® -- and I do hope that you are -- I would still recommend that you do a considerable “leg work” canvassing neighborhoods you would like to live in.

Once I did just that and I found a house that the selling agent had literally just put the for sale sign up – I picked up the first flier…

I had driven by that same street just a week earlier and I had seen that another house next to it was up for sale but it was out of my home buying price range.

My agent at the time – and now my colleague, with whom I do some business together, asked me to drive by one more time and see if I really liked the location, maybe we could call the listing agent and work out some deal like a lease-purchase agreement…

So I drove back to that spot and all of the sudden there it was: A brand new listing exactly at my home buying price range, exactly what I was looking for…

Needless to say, I ended up buying that house – in 30 days!!

“House Rich And Cash Poor”

On the other hand, I recently became aware of an acquaintance of mine who both a home not through me mind you – it was town home. One of the requirements is that every new home owner had to have an alarm system installed… well, this person was already short on cash do it and could not move for a few weeks.

This is very typical of what I have been talking all along… Unless there will much more coming from somewhere else, this is not an auspicious beginning for a new homeowner.

Conquer And Hold

Please forgive me if I overextended myself – but I am very passionate about you buying your home, but more so about you keeping it!

I want to make darn sure that I pass across the importance maintaining the balance of your home buying price power and your needs and wants about your new home.

A while ago I heard a brass in the Afghanistan war saying their new strategy was going to be “conquer and hold:” Please make sure that your strategy is the same as well!

Buying a house is sometimes the easiest part. I am confident that after reading tips in this page you will be able to “hold” it as well!

And that is my most import message here!

JC Fagundes, Head Broker
EQUAL SERVICE TO ALL.
Residential. Commercial. Investments.
Ph: 404 801 4141

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