Buying a house is the American dream, right? That is the idea that has always been talked about. While, it can be a dream fulfilled and a good investment, it can also be a long-term burden that turns into a financial disaster. Because of that one needs to make sure they do not become house poor when they buy. For some people, buying and owning a house just doesn’t make financial sense. So before you commit to 30 years of house payments, ask yourself these 5 questions before buying a house in Floresville.
1. Am I Buying a House in Floresville for the Right Reasons?
The first step is to determine exactly why you’re buying a house in Floresville. Some people buy a house for the tax benefits and to plant roots. Others, however, do so just because they think that’s what is expected of them. For them renting might be a better option. A house isn’t always an investment because it won’t appreciate in every case and there will be expenses as well. So before you sign the contract, you need to make sure you’re buying a house for the right reasons. Houses do not automatically appreciate in value. If a house is not maintained it won’t appreciate and could lose value. Value also depends upon other factors such as location (neighborhood) and the town you choose to live in.
Is that area in an upswing or could it be headed for a downturn? Because we are in the Eagleford Shale area many of the towns across south Texas saw a large upswing starting in 2012. When Eagleford started to decline while the areas saw a downturn. But not all areas were affected by the downturn as much as other areas? Why? Because some areas such as Floresville and La Vernia compared to say Pleasanton are closer to San Antonio and that makes them desirable to people who work in San Antonio, not just Eagleford Shale employees.
2. Will Expenses Be More Than 30% of My Net Income?
The mortgage payment is far from the only expense involved in buying a house in Floresville. You also have to factor in maintenance and repairs, insurance, property taxes, and so on. And if these expenses come to more than 30% of your net income (take-home pay), then you may not be able to afford the house. Estimates are that 39 million Americans can’t really afford their houses. And that’s usually because they didn’t take into account those other expenses when figuring that 30%. And those expenses do occur, even in newer homes. The hot water heater goes out, the roof is damaged by hail, the air conditioning needs repair. Yes even when insurance covers things like hail damage, there is a deductible of at least 1% of your home value for the homeowner to pay.
Plus no one ever wants to be house poor. “House poor” means not having any money to do anything besides paying for your house. No money for eating out, going to the movies, going to SeaWorld makes that house become a burden instead of a place you love.
3. Do I Have Enough Emergency Cash?
Also when buying a house in Floresville, you need to keep plenty of extra cash on hand for all those inevitable emergencies. Owning a house carries with it expenses for repairs that come up – things like a leaking roof or a broken furnace. You simply can’t let these emergencies catch you off guard financially. Financial experts recommend that you have strong emergency fund before buying a house – ideally, one that will cover at least six months’ living expenses. If you don’t, then maybe you shouldn’t buy that house. The other factor that can affect you is losing a job or a major illness where one has to be off work for an extended period of time. That emergency cash fund will tide one through those type of events.
4. 20% Down, Can I afford that?
If you want to avoid the extra expense of private mortgage insurance (PMI), then the standard down payment for buying a home in Floresville is 20% of the house’s price – a pretty big chunk of money. Paying 20% down let’s you avoid having to pay the extra expense of PMI, which can be as high as 1% of the mortgage. Suppose, for example, you’re borrowing money to buy a $300,000 a house. If you don’t pay 20% down – that is, $60,000 – then you’ll have to pay an additional $3,000 a year for PMI. So . . . can you really afford 20% down to save money?
5. How Long Will I Live Here?
Don’t forget that the actual process of buying a house in Floresville has certain costs, not least of which are the closing costs, typically 2% to 5% of the purchase price. So that same $300,000 house could cost up to $15,000 at closing. And if you don’t live in the house very long and have to sell soon, you will actually lose money because there hasn’t been enough time recoup the closing costs by appreciation. So, it’s recommended that you live in a house a minimum of three to five years. That is the time frame that lenders feel is needed to break even on the cost of buying a home.
Buying a house in Floresville is the fulfillment of a long-held dream for some people, but for others, it’s just not a good idea financially. So before you take that big step, ask yourself these questions. Then if, after answering, you find that traditional house buying isn’t for you, we can offer other options. Just call us today at (210) 216-7722!