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Advice on Financing Your First Home
Buying your first house is very exciting. But financing your home purchase can be a daunting experience. In both cases, do your research and shop carefully to ensure you find exactly what you want and need.
Deciding how much to spend on your home and which type of mortgage will work best for you — as well as understanding the settlement process — can be confusing. However, there are many sources that can help you get prepared well before you step foot into a sales office, model home or open house.
- Get familiar with the lingo. NAHB’s Home Buyer’s Dictionary can help you.
- Figure out what you can actually afford to pay on a monthly basis. Remember that, in addition to the monthly principal and interest, you will also pay into escrows for property taxes, hazard insurance and possibly a home owners’ or condominium association assessment. You have more knowledge about your living expenses than a lender. Hold firm with that number and don’t be tempted to agree to an amount higher than what you are comfortable spending. Mortgage calculators are a great way to figure out what your monthly payments would be based on interest rates and down payment amounts. Calculators can be found on most real-estate-focused websites.
- Pay down your debts. Credit card debt limits what you qualify for from a lender. Lenders want to see a total debt service ratio that is less than 40% of your monthly income.
- Attend a first-time home buying seminar or talk to a credit counselor who does not work for a lender. You can research your options without being influenced by someone who has a financial interest in the home or loan you choose. The U.S. Department of Housing and Urban Development (HUD) offers free housing counseling and seminars.
- HUD also has a handy booklet on its site called “Buying Your Home: Settlement Costs and Information.” It describes process and explains most of the expenses you will encounter. It is free and most lenders are required to provide their loan applicants with a copy of this document under the Real Estate Settlement Procedures Act (RESPA). However, you will be able to shop more wisely for settlement services if you have read this information before you visit a lender.
- When you have done your research and are ready to move on to the next step, visit a lender, understand the loan choices that would be available to you, and, once you’ve determined the most suitable loan, get pre-approved for that loan. Since you will already know how much money you can borrow, you will know what price range you should look at and can move quickly if you are bidding on a house that has several interested buyers. A lender’s pre-approval would still be subject to a final verification of your credit and a satisfactory appraisal, but it’s a big step toward becoming a home owner.
Housing Trends for Baby Boomers
New Features Keep Pace with this Active Generation
Baby boomers, who were the largest American generation until the Millennials took over, are either retired or quickly nearing retirement age. Boomers, born between 1946 and 1964 and who count more than 76 million, may be getting older, but they are definitely not ready to head to the retirement home!
The boomer generation is more active than generations past, has a more sophisticated style and wants options and choices in their homes. Whether they are selling the homes where they raised their children and heading to sunnier pastures, or staying put and redesigning to accommodate their retired lifestyle, boomers are making an impact on housing trends.
Some features that home builders and remodelers are seeing as they begin to cater to the boomers include:
Home Offices: Some boomers are choosing to work past the age of 65. As they transition from a traditional 9-to-5 job, however, they want home offices for flexibility. A second career or part-time employment often eliminates the hassle of commuting while keeping them active and bringing in supplementary income.
Tech/Media Centers: The tech-savvy boomer generation wants top-of-the-line amenities for their homes such as a media room with surround sound and central control systems, which manage all media sources in one location. The house may include a wireless home network, remote control lighting and security features.
Wider Doors and Hallways: As a person ages, there is a likelihood that use of a wheelchair might become a necessity. Designing a home that is livable now but can transition and be functional as the occupant ages is important in ensuring that the home will be a good long-term investment. Wider doors and hallways are useful for moving larger furniture today, and will also be wheelchair accessible tomorrow.
Better Lighting/Bigger Windows: The need for more lighting usually increases as we grow older. To accommodate this, builders are adding more windows and making them larger to let in more natural light. They are also adding more light fixtures in areas including under cabinets and in stairwells. Multiple switches to reduce the number of trips and dimmer controls to eliminate glare are other options.
First-Floor Bedrooms and Bathrooms: More than 40% of new homes have master suites downstairs, a 15% increase over a decade ago. Boomers not wishing to go up and down stairs with bad knees and aching backs have helped fuel this trend. The bedrooms also are also larger, with more spacious walk-in closets and bathrooms that have a separate tub and shower and dual sinks.
Easy to Maintain Exteriors/Landscaping: Yard work, painting, and other landscaping chores may no longer be enjoyable to aging home owners. People who move to a new home when they retire may opt for a maintenance-free community. Those that choose to stay in their homes might make improvements to exterior surfaces such as installing stucco, brick or low-maintenance siding. Lawns are being replaced with living patios, decorative landscaping, or flower beds which can be a hobby for gardening enthusiasts.
Flex Space: Flex space has become more prevalent in both new homes and remodeling. Flex spaces are rooms that take on the purpose of the present home owner’s needs but can adjust with changes as they occur. What may have once started out as a guest bedroom can be redecorated to serve as a hobby room or library. This allows home owners to stay in their homes longer as it continues to serve their needs throughout life’s stages.
A Certified Aging-in-Place Specialist (CAPS) has been trained in the unique needs of the older adult population, aging-in-place home modifications, common remodeling projects, and solutions to common barriers. Access our directories to find a designated CAPS builder or remodeler in your area.
Decoding Energy Efficiency Lingo
The terminology for energy-efficient homes can be very technical and confusing to home owners. Here are some simple definitions to help you understand popular energy-saving options for your home.
A home that uses less energy than a traditional home without compromising service to owners and occupants.
Energy efficiency can be achieved through things such as improved thermal envelopes, solar-oriented construction, low-e windows and efficient appliances. Note that energy efficiency and energy conservation are different in that conservation efforts reduce or eliminate services to save energy.
Learn how efficient your home is now and ways to improve your home’s efficiency with ENERGY STAR’s Home Energy Yardstick.
Net Zero-Energy Home
A home in which energy production and consumption are equivalent.
That means the energy produced by the home must meet the household’s needs. Rooftop solar panels are perhaps the most common way for homes to produce energy. To help achieve net-zero energy, the home should be designed using a holistic, whole-house approach that strives for efficiency and reduces energy consumption without sacrificing service or comfort.
To see examples of zero-energy homes, take a look at Kaupuni Village in Hawaii.
Net Zero-Energy-Ready Home
A home that is outfitted with the necessary structural and technological support to install energy-producing technologies.
Net zero energy-ready homes are appropriate for home owners who plan to install energy-producing technology in the future but do not have the means or desire to do so at the current time. When the home owner is ready to install such technology, it will be a much simpler process.
Net Positive-Energy Home
A home that produces more energy than the household needs.
A home owner could receive credit from their utility company for the excess energy returned to the grid that is produced by the energy technologies and saved by energy-efficiency measures.
Check out this net positive-energy home in San Marcos, Calif.