03.07.2011 / Same Budget - Bigger, Better Home
Do you find yourself wishing for additional space, more amenities, a more comfortable layout or perhaps a more ideal neighborhood? Find out if you are ready to move on up with these simple guidelines.
"Find out if you're ready to move on up with these simple guidelines."
Make Yourself at Home
Write down a list of goals you’d like to achieve with your trade-up. Create a checklist of must-haves and wants - for instance, maybe you need a fenced-in yard for your dog and you’d like to have your kid’s school within walking distance. Prioritize the items on your list and start thinking about which features offer the most value for the additional cost. Then, determine how much you are willing to pay for a home that meets most of your needs.
Put Your Budget Under the Microscope
Evaluate your debt-to-income ratio (divide your total housing debts including mortgage payment, insurance, taxes and other related expenses by your gross monthly income) to see where you fall - a 36% or lower debt-to-income ratio is preferable. Review your credit with ExperianSM, Equifax®, and TransUnion® to gauge if an upgrade is financially feasible. Think of positive steps you can take to put yourself in a better position for a trade-up, such as paying down high interest debt.*
Look for the right loan before you start home shopping to get an idea of how much house you can afford. A First National Bank Home Mortgage Specialist can recommend lending solutions, help you weigh the benefits of a fixed-rate vs. a variable-rate loan and work to pre-qualify you for your desired loan amount.
Count (All) Your Costs
There’s more to a trade-up than higher monthly payments. You should also factor in related expenses like mortgage and insurance payments, real estate taxes, maintenance and upkeep, closing costs and loan fees. If your new home might require some upgrades or your current home needs some work before it hits the market, anticipate home improvement costs.
Consider Your Homebuyers Tax Credit**
If you are a first-time homebuyer you have until April 30, 2010 to enter into a binding contract for the purchase of a principle residence and it must be purchased (closed) by June 30, 2010 in order to be eligible to receive up to an $8,000.00 tax credit. If you are an existing homeowner, you can be eligible to receive up to $6,500 if you enter into a binding contract (for the purchase of a new principle residence) by April 30, 2010 and purchase it (close) by June 30, 2010. These credits can help ease your tax bill or increase your refund which equates to more cash to complete necessary home improvements, buy new furniture, or make a principle payment towards your loan.
Test Drive Your Trade-Up Budget
Unless you’re poised for a promotion soon, you’ll have to rework your budget a bit in anticipation of a mortgage payment increase. By taking simple steps to scale back in some spending areas, you may be able to afford your upgrade without feeling a substantial pinch. Design a new budget based on a higher-cost home and try living on it for a month or two.
Ask a Home Loan Expert
If you think your family might be ready for a new and improved home, First National Bank can help you evaluate your budget, anticipate associated costs and find a lending solution that’s comfortable for you. Contact a First National Bank Home Mortgage Specialist today at 402-602-5300 or 877-687-5626 to discuss your financial situation and your trade-up options. Also, check out our Online Mortgage Center at www.firstnational.com/mortgage for more helpful resources.
*"What’s your debt-to-income ratio?" Lisa Smith, Investopedia.com, http://www.investopedia.com/articles/07/debt_to_income.asp, posted July 18, 2007, accessed Nov. 20, 2007.
**This article does not constitute legal, tax, accounting or other professional advice. Although it is intended to be accurate, neither the publisher nor any other party assumes liability for loss or damage due to reliance on this material. For more detailed information on the tax credit, visit irs.gov, consult your tax professional.