As a metro area straddling two states – Missouri and Kansas – Kansas City keeps the cost of living cheap for residents of both states. With housing and utilities typically costing just over 26.3 percent of the blended annual household income, Kansas City moved up two spots on the Best Affordable Places to Live list this year, when it ranked No. 19 in 2016.
As a buyer, just keep in mind that mortgage pre-approval is different from mortgage pre-qualification. Pre-qualify, and you're undergoing a much simpler process that can give you a ballpark figure of what you can afford to borrow, but with no promise from the lender. Getting pre-approved is more of a pain since you'll have to provide tons of paperwork, but it's worth the trouble since it guarantees you're creditworthy and can truly buy a home.
Many realtors will not spend time with clients who haven't clarified how much they can afford to spend. And in most instances, sellers will not even entertain an offer that’s not accompanied with a mortgage pre-approval. That's why – if you don't have all cash (how many first-time buyers do do?) – your next step is talking to a lender and/or mortgage broker.
Previously, she served as a researcher of commercial real estate transactions and information, and is currently a member of the National Association of Real Estate Editors. Thorsby studied Political Science at the University of Michigan, where she also served as a news reporter and editor for the student newspaper The Michigan Daily. Follow her on Twitter or write to her at [email protected]
Homeowners insurance and property taxes very based on your geographic location. Florida has notoriously high homeowner's insurance rates, where they average $161.08 per month. In Idaho and Wisconsin, rates are a bit lower, averaging below $50 per month, according to Value Penguin. Property taxes average higher in New Jersey, New Hampshire, Texas and Wisconsin and they're lower in Louisiana, Hawaii, and Alabama.
Don’t let these unknowns deter you. Research and diligence can unlock the mysteries of the process and enable you to buy your first home without feeling too lost or overwhelmed. Plenty of resources exist to explain the process. This tutorial is a great start. We’ll take you through everything from the simple stuff, like finding a place that you like, to the complicated stuff, like applying for a loan.
Despite the District of Columbia having the fifth-highest cost of living out of the 100 largest metro areas in the U.S., the nation's capital is the 25th best affordable place to live. The District’s median blended annual household income – the median total income for households (rather than individuals) that rent or own a home in the area – is more than $95,000. This makes the blended annual cost of living – factoring in mortgage payments, rent, utilities and taxes – of slightly more than $25,000 comparatively affordable.
When you rent a home, you generally only have one payment — rent — and then maybe renter's insurance, which is optional. When you buy a place, your mortgage payment is only the beginning of an array of costs. Homeowner's association fees can be as low as $0 or as high as a few hundred dollars per month, depending on where you live and the amenities and services offered.
Especially when you’re in a seller’s market, where there are more buyers than houses for sale, don’t be discouraged if the first house you bid on goes to another buyer. Heyer says a multiple-offer situation tends to be a double-edged sword: “If they don’t get the apartment they’re going to be bummed, at least in a bidding war, and if they do get it, they’re going to instantly feel like they overpaid, which is also a bummer.”
When you’ve found a local lender, you’ll have to submit your financial information to get pre-approved, including tax forms and W-2s, recent pay stubs, savings, retirement accounts, and debt obligations. After reviewing all of this information, the lender will let you know the size mortgage for which you can qualify and provide a letter that shows you’re pre-qualified. In the meantime, keep track of all those financial forms and add new pay stubs and bank statements to the file, as you’ll need them again. That pre-approval letter usually expires after 60 or 90 days, so if you haven’t found your home before it expires, you’ll just have to resubmit the paperwork.
Closing is a formal process where all parties sign the necessary paperwork to complete the transaction and transfer the property’s title from the seller to you. The seller receives payment for the home, and you receive the house keys! From the amount credited to the seller, the title representative subtracts the funds to pay off the existing mortgage and other transaction costs. Deeds, loan papers and other documents are prepared, signed, and ultimately filed with local property record office.
Gannon Forrester, an associate broker with Warburg Realty in New York City, says adjusting to the price of properties is the biggest challenge for first-time homebuyers in a pricey market like Manhattan – especially for those who haven’t lived in the area for long: “For someone [coming in] from outside New York, it’s a big culture shock of what the sticker price is.”
While 20 percent is ideal, you don’t necessarily need that large of a down payment to buy a home. There are loan programs that cater to first-time home buyers, such as the FHA loan, which allow for down payments as little as 3.5%. Even some conventional loans allow for down payments as low as 3 percent. And certain loans, such as VA loans for veterans and military or USDA loans for buyers in rural areas, don’t require a down payment at all.
Fixed rate mortgages are just what they say they are -- mortgage loans that allow borrowers to "lock in" a fixed interest rate over the complete loan period (typically 15-to-30 years.) There are upsides and downsides to fixed-rate mortgages, depending on the direction of interest rates. If rates spiral downward, the loan borrower is stuck paying the higher interest rate stated on the mortgage loan contract. On the other hand, if interest rates climb, the borrower's fixed interest rate insulates them from paying the added costs linked to mortgage loans with soaring interest rates after the mortgage is signed.
You can also order a free copy of your credit reports from each of the credit bureaus at annualcreditreport.com as long as you haven't done so in the last 12 months. One study showed that about 70% of credit reports have errors in them so check to see if there are any in yours that could be hurting your credit score and if so, be sure to have them corrected. It’s bad enough to suffer from your own mistakes. You don’t want to suffer from someone else’s too. Finally, you may want to put a security freeze on your credit reports to protect you from identity theft.
What to do instead: Have a frank discussion with anyone who offers money as a gift toward your down payment about how much they are offering and when you’ll receive the money. Make a copy of the check or electronic transfer showing how and when the money traded hands from the gift donor to you. Lenders will verify this through bank statements and a signed gift letter.
The type of home that a person prefers is another factor to take into consideration when determining where to live. Things to consider include buying a new home versus a resale home. Home types include single-family detached homes, semi-detached homes, duplex homes, town houses, or even condos. When determining what type of home is the best fit, a person should take into consideration the lifestyle that he or she lives, current needs - such as rooms - and future needs of the family if it should grow.
Find out how familiar the agent is with the areas you want to look at. If they have little expertise and no network in the neighborhood, then you won’t get the agent advantage of being the first to see a house (sometimes even before it’s listed) or getting expert advice on price. Plus, neighborhood knowledge saves the buyer time because an agent will likely know exactly where to look and what houses to show based on your needs.